Risk Management: Derivatives
Large multinational banks often use a variety of instruments in order to protect themselves from risk. One of the most common ones is options. These are contracts which allow the buyer the right but not the obligation to exchange an asset at a specified price on a specific date. These are used typically to manage risk and ensure that the bank is not overexposed to market risk in any specific sector.
The objective was to integrate a large number of variables such as stock prices, momentum, earnings releases and 10-K reports, etc and generate aggregate estimations of future asset prices. These alpha signals had to be made available to traders for them to be able to better hedge risk on real time.
An automated solution built on Python was created to allow the client to anticipate unusual movements of the market. This tool allows them to better provide their services and manage the risk associated with it. Interactive graphical tools were built in Java Swing and were integrated with current floor trading systems to better assess the best course of action to take in all scenarios.
DataSpartan delivered both research results for this case and an interactive visualisation of market movements to their requirements. This tool allows them to better anticipate shocks and explain tendencies. The current tool is integrated within the dashboards of option traders as a customisation widget.