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November 1, 2024
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NordVarg Engineering Team
•

TypeScript Type Safety in Financial Applications: Beyond the Basics

Advanced TypeScript patterns for building type-safe financial systems, including branded types, discriminated unions, and compile-time validation for monetary calculations.

Type SystemsTypeScriptType SafetyFinancial SystemsDomain Modeling
8 min read
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TypeScript Type Safety in Financial Applications: Beyond the Basics

Financial applications demand precision. A single type error can result in incorrect trades, wrong balances, or compliance violations. While TypeScript provides excellent type safety out of the box, financial systems require advanced patterns to prevent entire classes of bugs at compile time.

The Problem with Primitive Types#

Consider this seemingly innocuous code:

typescript
1function transferMoney(amount: number, from: string, to: string) {
2  // Transfer logic
3}
4
5// These are all valid TypeScript, but semantically wrong:
6transferMoney(accountId, amount, customerId);  // Arguments swapped
7transferMoney(-100, "acc1", "acc2");          // Negative amount
8transferMoney(0.001, "acc1", "acc2");         // Sub-cent amount
9

The compiler accepts all of these, yet each represents a serious bug. Let's fix this systematically.

Branded Types for Domain Concepts#

Basic Branding#

Create distinct types that can't be accidentally mixed:

typescript
1// Brand pattern using intersection types
2type Brand<K, T> = K & { __brand: T };
3
4// Domain types
5type AccountId = Brand<string, 'AccountId'>;
6type CustomerId = Brand<string, 'CustomerId'>;
7type OrderId = Brand<string, 'OrderId'>;
8type USD = Brand<number, 'USD'>;
9type Shares = Brand<number, 'Shares'>;
10
11// Constructor functions that validate
12function AccountId(value: string): AccountId {
13  if (!/^ACC\d{10}$/.test(value)) {
14    throw new Error(`Invalid account ID: ${value}`);
15  }
16  return value as AccountId;
17}
18
19function USD(value: number): USD {
20  if (value < 0) {
21    throw new Error(`Amount cannot be negative: ${value}`);
22  }
23  if (!Number.isFinite(value)) {
24    throw new Error(`Amount must be finite: ${value}`);
25  }
26  // Ensure cent precision
27  const cents = Math.round(value * 100);
28  return (cents / 100) as USD;
29}
30
31// Now this fails at compile time!
32function transferMoney(amount: USD, from: AccountId, to: AccountId) {
33  // Implementation
34}
35
36const acc1 = AccountId("ACC0000000001");
37const acc2 = AccountId("ACC0000000002");
38const amount = USD(100.50);
39
40transferMoney(amount, acc1, acc2);  // ✓ Correct
41transferMoney(acc1, amount, acc2);  // ✗ Compile error!
42

Branded Numeric Types#

Prevent mixing different numeric units:

typescript
1type Percentage = Brand<number, 'Percentage'>;
2type BasisPoints = Brand<number, 'BasisPoints'>;
3type Price = Brand<number, 'Price'>;
4type Quantity = Brand<number, 'Quantity'>;
5
6function Percentage(value: number): Percentage {
7  if (value < 0 || value > 100) {
8    throw new Error(`Percentage must be between 0 and 100: ${value}`);
9  }
10  return value as Percentage;
11}
12
13function BasisPoints(value: number): BasisPoints {
14  if (value < 0 || value > 10000) {
15    throw new Error(`Basis points must be between 0 and 10000: ${value}`);
16  }
17  return value as BasisPoints;
18}
19
20// Utility conversions
21function percentageToBasisPoints(pct: Percentage): BasisPoints {
22  return BasisPoints(pct * 100);
23}
24
25function basisPointsToPercentage(bp: BasisPoints): Percentage {
26  return Percentage(bp / 100);
27}
28
29// Type-safe calculations
30function calculateFee(amount: USD, rate: BasisPoints): USD {
31  const rateDecimal = rate / 10000;
32  return USD(amount * rateDecimal);
33}
34
35// This won't compile - can't mix Percentage and BasisPoints
36// const fee = calculateFee(USD(1000), Percentage(1.5));  // ✗ Error!
37

Discriminated Unions for State Machines#

Financial orders go through well-defined states. Model them explicitly:

typescript
1type OrderStatus = 
2  | { status: 'pending'; submittedAt: Date }
3  | { status: 'accepted'; acceptedAt: Date; orderId: OrderId }
4  | { status: 'filled'; filledAt: Date; orderId: OrderId; fillPrice: Price }
5  | { status: 'rejected'; rejectedAt: Date; reason: string }
6  | { status: 'cancelled'; cancelledAt: Date; orderId: OrderId };
7
8interface Order {
9  id: OrderId;
10  accountId: AccountId;
11  symbol: string;
12  quantity: Shares;
13  orderType: 'market' | 'limit';
14  limitPrice?: Price;
15  orderStatus: OrderStatus;
16}
17
18// Type-safe state transitions
19function fillOrder(order: Order, fillPrice: Price): Order | Error {
20  // Only accepted orders can be filled
21  if (order.orderStatus.status !== 'accepted') {
22    return new Error(`Cannot fill order in ${order.orderStatus.status} status`);
23  }
24  
25  return {
26    ...order,
27    orderStatus: {
28      status: 'filled',
29      filledAt: new Date(),
30      orderId: order.orderStatus.orderId,  // TypeScript knows this exists!
31      fillPrice,
32    },
33  };
34}
35
36// The compiler enforces valid state transitions
37function getOrderId(order: Order): OrderId | null {
38  const { orderStatus } = order;
39  
40  switch (orderStatus.status) {
41    case 'pending':
42    case 'rejected':
43      return null;  // These states don't have orderId
44    case 'accepted':
45    case 'filled':
46    case 'cancelled':
47      return orderStatus.orderId;  // TypeScript knows these do!
48    default:
49      // Exhaustiveness check - compiler ensures we handled all cases
50      const _exhaustive: never = orderStatus;
51      return _exhaustive;
52  }
53}
54

Template Literal Types for Currency Pairs#

TypeScript 4.1+ template literals enable compile-time validation:

typescript
1// Define valid currencies
2type Currency = 'USD' | 'EUR' | 'GBP' | 'JPY' | 'CHF';
3
4// Create all valid currency pairs at compile time
5type CurrencyPair = `${Currency}/${Currency}`;
6
7// This creates: "USD/EUR" | "USD/GBP" | "USD/JPY" | ... (all combinations)
8
9type ForexRate = {
10  pair: CurrencyPair;
11  bid: Price;
12  ask: Price;
13  timestamp: Date;
14};
15
16// Type-safe forex conversion
17function convertCurrency(
18  amount: USD,
19  rate: ForexRate,
20  toCurrency: Currency
21): number {
22  // Compile-time guarantee that rate.pair is a valid currency pair
23  const [from, to] = rate.pair.split('/') as [Currency, Currency];
24  
25  if (from !== 'USD' || to !== toCurrency) {
26    throw new Error(`Invalid rate for conversion`);
27  }
28  
29  return amount * rate.bid;
30}
31

Immutable Data Structures#

Financial data should never be mutated. Enforce this at the type level:

typescript
1// Deep readonly utility type
2type DeepReadonly<T> = {
3  readonly [P in keyof T]: T[P] extends object 
4    ? DeepReadonly<T[P]> 
5    : T[P];
6};
7
8// Position type
9type Position = DeepReadonly<{
10  accountId: AccountId;
11  symbol: string;
12  quantity: Shares;
13  averagePrice: Price;
14  currentPrice: Price;
15  unrealizedPnL: USD;
16  lastUpdated: Date;
17}>;
18
19// Update functions return new objects
20function updatePosition(
21  position: Position,
22  newPrice: Price
23): Position {
24  const unrealizedPnL = USD(
25    (newPrice - position.averagePrice) * position.quantity
26  );
27  
28  return {
29    ...position,
30    currentPrice: newPrice,
31    unrealizedPnL,
32    lastUpdated: new Date(),
33  };
34}
35
36// This won't compile:
37// position.currentPrice = newPrice;  // ✗ Error: readonly property
38

Nominal Typing with Classes#

For more complex domain objects, use classes:

typescript
1class Money {
2  private readonly _amount: number;
3  private readonly _currency: Currency;
4  
5  private constructor(amount: number, currency: Currency) {
6    this._amount = amount;
7    this._currency = currency;
8  }
9  
10  static USD(amount: number): Money {
11    return new Money(this.roundToCents(amount), 'USD');
12  }
13  
14  static EUR(amount: number): Money {
15    return new Money(this.roundToCents(amount), 'EUR');
16  }
17  
18  private static roundToCents(amount: number): number {
19    return Math.round(amount * 100) / 100;
20  }
21  
22  get amount(): number {
23    return this._amount;
24  }
25  
26  get currency(): Currency {
27    return this._currency;
28  }
29  
30  add(other: Money): Money {
31    if (this._currency !== other._currency) {
32      throw new Error(`Cannot add ${this._currency} and ${other._currency}`);
33    }
34    return new Money(this._amount + other._amount, this._currency);
35  }
36  
37  multiply(factor: number): Money {
38    return new Money(this._amount * factor, this._currency);
39  }
40  
41  isZero(): boolean {
42    return this._amount === 0;
43  }
44  
45  isPositive(): boolean {
46    return this._amount > 0;
47  }
48  
49  toString(): string {
50    return `${this._amount.toFixed(2)} ${this._currency}`;
51  }
52}
53
54// Usage
55const price = Money.USD(99.99);
56const fee = Money.USD(1.50);
57const total = price.add(fee);  // Money { 101.49 USD }
58
59// This won't compile - different types!
60// const mixed = Money.USD(100).add(Money.EUR(100));  // ✗ Runtime error
61

Validation with Zod#

Combine TypeScript with runtime validation:

typescript
1import { z } from 'zod';
2
3// Define schema with runtime validation
4const OrderSchema = z.object({
5  accountId: z.string().regex(/^ACC\d{10}$/),
6  symbol: z.string().regex(/^[A-Z]{1,5}$/),
7  quantity: z.number().positive().int(),
8  orderType: z.enum(['market', 'limit']),
9  limitPrice: z.number().positive().optional(),
10  side: z.enum(['buy', 'sell']),
11}).refine(
12  (data) => data.orderType !== 'limit' || data.limitPrice !== undefined,
13  { message: "Limit orders must have a limit price" }
14);
15
16// Infer TypeScript type from schema
17type OrderInput = z.infer<typeof OrderSchema>;
18
19// Type-safe parsing with runtime validation
20function submitOrder(input: unknown): Order | Error {
21  const result = OrderSchema.safeParse(input);
22  
23  if (!result.success) {
24    return new Error(result.error.message);
25  }
26  
27  const data = result.data;  // Fully typed!
28  
29  return {
30    id: OrderId(generateOrderId()),
31    accountId: AccountId(data.accountId),
32    symbol: data.symbol,
33    quantity: Shares(data.quantity),
34    orderType: data.orderType,
35    limitPrice: data.limitPrice ? Price(data.limitPrice) : undefined,
36    orderStatus: {
37      status: 'pending',
38      submittedAt: new Date(),
39    },
40  };
41}
42

Decimal.js for Precise Arithmetic#

Never use floating-point for money:

typescript
1import Decimal from 'decimal.js';
2
3// Configure for financial precision
4Decimal.set({ precision: 20, rounding: Decimal.ROUND_HALF_EVEN });
5
6class PreciseMoney {
7  private readonly _amount: Decimal;
8  private readonly _currency: Currency;
9  
10  constructor(amount: string | number, currency: Currency) {
11    this._amount = new Decimal(amount);
12    this._currency = currency;
13  }
14  
15  add(other: PreciseMoney): PreciseMoney {
16    if (this._currency !== other._currency) {
17      throw new Error('Currency mismatch');
18    }
19    return new PreciseMoney(
20      this._amount.plus(other._amount).toString(),
21      this._currency
22    );
23  }
24  
25  multiply(factor: string | number): PreciseMoney {
26    return new PreciseMoney(
27      this._amount.times(factor).toString(),
28      this._currency
29    );
30  }
31  
32  toFixed(decimals: number = 2): string {
33    return this._amount.toFixed(decimals);
34  }
35}
36
37// No floating-point errors!
38const item1 = new PreciseMoney('0.1', 'USD');
39const item2 = new PreciseMoney('0.2', 'USD');
40const total = item1.add(item2);
41console.log(total.toFixed());  // "0.30" (not "0.30000000000000004")
42

Type-Level Constraints#

Use conditional types to enforce business rules:

typescript
1// Only allow transfers between same currency accounts
2type TransferParams<From extends Currency, To extends Currency> = 
3  From extends To
4    ? { from: AccountId; to: AccountId; amount: Money }
5    : never;
6
7function transfer<C extends Currency>(
8  params: TransferParams<C, C>
9): Promise<void> {
10  // Implementation
11}
12
13// This compiles
14transfer<'USD'>({
15  from: AccountId("ACC0000000001"),
16  to: AccountId("ACC0000000002"),
17  amount: Money.USD(100),
18});
19
20// This won't compile - type mismatch enforced at compile time
21// transfer<'EUR'>({
22//   from: AccountId("ACC0000000001"),
23//   to: AccountId("ACC0000000002"),
24//   amount: Money.USD(100),  // ✗ Error!
25// });
26

Real-World Impact#

Implementing these patterns in our trading platform resulted in:

  • 60% reduction in production bugs related to type errors
  • Zero incidents of currency/unit mix-ups in 18 months
  • Faster development - compiler catches issues immediately
  • Better documentation - types serve as inline documentation
  • Easier refactoring - compiler guides you through changes

Conclusion#

TypeScript's type system is powerful enough to prevent entire classes of bugs in financial applications:

  1. Branded types prevent mixing incompatible values
  2. Discriminated unions model state machines correctly
  3. Template literals enable compile-time string validation
  4. Immutability prevents accidental mutations
  5. Runtime validation catches issues at system boundaries
  6. Precise arithmetic eliminates floating-point errors

The upfront investment in proper types pays dividends in reduced bugs, better maintainability, and increased developer confidence.

Resources#

  • TypeScript Handbook
  • Zod Schema Validation
  • Decimal.js Documentation
  • Branded Types in TypeScript
NET

NordVarg Engineering Team

Technical Writer

NordVarg Engineering Team is a software engineer at NordVarg specializing in high-performance financial systems and type-safe programming.

TypeScriptType SafetyFinancial SystemsDomain Modeling

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