Citi quants’ AI model aims to hedge earnings surprises

Machine learning tool forecasts effect of shocks on implied volatility surfaces in minutes.

Facebook owner Meta scored its biggest ever one-day loss in market value on February 2 this year, shedding a fifth of its worth after a disappointing earnings announcement. Two days later, Amazon recorded the biggest one-day gain—a 13% rise—after a positive announcement.

Such moves are the stuff of nightmares for options traders, who must hedge against the price moves such surprises can cause.

Quants at Citi have built a model that can help.

“It gives us a better idea of how our book is going

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The IMD Wrap: Will banks spend more on AI than on market data?

As spend on generative AI tools exceeds previous expectations, Max showcases one new tool harnessing AI to help risk and portfolio managers better understand data about their investments—while leaving them always in control of any resulting decisions.

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