Nasdaq has unveiled an machine learning methodology designed to revolutionize risk calculations and predictive analytics in the financial industry.
Integrated into the Calypso platform, this innovation is set to benefit banks, insurers, and other financial institutions by significantly accelerating the processing of complex trading and regulatory risk calculations, while maintaining high levels of accuracy.
The development focuses on a machine learning approach coupled with sophisticated mathematical modelling, which can perform financial instrument pricing across millions of scenarios up to 100 times faster than traditional methods. This not only speeds up the process but also drastically reduces the physical infrastructure needed, addressing a major cost concern for financial institutions.
Gil Guillaumey, senior vice president and head of capital markets technology at Nasdaq, emphasized the transformative potential of this technology. “All financial institutions trading OTC derivatives are required to perform increasingly complex calculations to meet internal risk controls and regulatory mandates,” he said. “The sheer scale of computing power required to meet the most demanding regulations, alongside the strategic benefits of more accurate real-time analytics, is driving a profound rethink about how we can leverage AI to reduce the cost of compliance.”
Nasdaq’s new XVA Accelerator uses Chebyshev Tensors, a mathematical approach that allows for faster convergence of calculations, resulting in very accurate approximations for a wide range of scenarios with fewer computations. This breakthrough is particularly significant given the industry-wide challenge of managing vast amounts of data and calculations required by modern risk management and regulatory demands.
The technology not only speeds up calculations but also adapts quickly to changing market conditions, which is invaluable during periods of market volatility. This agility ensures that financial institutions can respond more effectively to risks and maintain compliance with evolving regulatory standards.
Overall, Nasdaq’s innovation promises to reshape how financial institutions approach risk management, providing a more efficient, accurate, and cost-effective solution.
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