BMO, Riskfuel Partner for AI-Driven Structured Derivatives Solution

BMO Capital Markets and Riskfuel Analytics have partnered to utilise deep learning to develop models for pricing and scenario analysis of structured derivatives transactions.

The partnership follows a successful pilot project, which saw quantitative researchers from both firms develop a solution to speed up valuation of autocallable notes which previously presented significant runtime challenges when priced using traditional valuation methodologies.

“Structured notes are traditionally priced using slow numerical techniques that simulate an extremely large number of possible future states of the financial markets,” expklains Ryan Ferguson, founder and CEO of Riskfuel. “Riskfuel uses deep learning to replace these slow simulators with very fast neural nets. We are excited to be working with BMO on making production-ready versions of such models.”

As an early adopter of the technology for front office pricing, BMO says its partnership with Riskfuel Analytics adds to its track record as an innovator in capital markets, employing AI to improve the client experience and operational efficiency simultaneously. It adds that working with Riskfuel will reduce reliance on slow and expensive financial models to calculate pricing and risks of structured products.

“Riskfuel has delivered a cutting-edge proof of concept that promises the most significant step forward in quantitative finance in a generation,” says Graham Wells, head of equity quantitative modelling in global markets engineering at BMO. “Removing the runtime hurdle opens the door for significant advancements in accuracy and realism of structured notes pricing models.”