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Big Data > Fintech + algorithmic trading > Flashcards

Fintech + algorithmic trading Flashcards

1
Q

How do fintechs use big data in their operations?

A

Customer clustering
Asset allocation
Risk Management
Fraud Detection
Authentication
Transactions

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2
Q

Explain how would an insurance company use big data in their activities?

A

They need data on the customer (age, gender, medical history, criminal record), the insured product (type of product, usage, color for a car, etc), to determine how much they’re gonna make you pay for the insurance

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3
Q

What is the Fintech ecosystem?

A

It’s very well-funded

Personal Finance (vanguard)
Regtech: (Regulatory services)
Digital bank services (revolut)
Payment services (paypal)
alt finance (bread)
insureance tech (lemonade)
blockchain (ethereum)
Digital ID veryfication (IDnow)

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4
Q

What are the fintech sub sectors?

A

personal finance
payments
blockchain
lending
regtech
insurance
capital markets
wealth management
money transfer (wise)
Mortgage real estate

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5
Q

What is an API?

A

it’s an interface by which computers can exchange information and instruction with one another w/o human intervention.

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6
Q

What does API stand for?

A

Application Program Interface

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7
Q

What is the most common API?

A

REST API, used on the World Wide Web

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8
Q

How does API work?

A

The computer sends a request in JSON format which is then converted into HTTP through the different methods. The server receives it and sends a response in HTTP which gets conevrted into JSON

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9
Q

What does REST API consist of?

A

server address and parameters

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10
Q

How are APIs fueling the open banking revolution?

A

Different services can be aggregated using API.

With open banking, client and product data is shared among customers, banks, third-party providers and price comparison websites

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11
Q

Why did the EU push for open banking?

A

To incentivize competition

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12
Q

What is the impact of GDPR on finance when it comes to explicit consent?

A

stricter requirements on explicit consent

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13
Q

How do insurance companies use AI?

A

Product innovation
Process optimization
Customer experience

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14
Q

What are the regulations surrounding fintech?

A

GDPR
Banking regulations
Payment Directives (PSD2)

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15
Q

What is the impact of GDPR on finance when it comes to territorial scope?

A

Much broader scope

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16
Q

What is the impact of GDPR on finance when it comes to right of access?

A

Information on controller and the stored personal data must be provided

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17
Q

What is the impact of GDPR on finance when it comes to right to rectification?

A

Incorrect data has to be rectified

18
Q

What is the impact of GDPR on finance when it comes to right to erasure?

A

delete data if it’s no longer required for the original purpose

19
Q

What are the recent trends on Fintech?

A

The funds raised for fintechs is growing exponentially.

The number of Fintech IPOs is increasing exponentially.

The number of fintechs founded every year is decreasing.

19
Q

What is the impact of GDPR on finance when it comes to right to data portability?

A

individuals can request copies of personal data

20
Q

What is the impact of GDPR on finance when it comes to DP by design and by default?

A

Develop default privacy protection mechanisms and implement monitoring processes

21
Q

What is the impact of GDPR on finance when it comes to processor?

A

Processing by 3rd parties must be governed by contract

22
Q

What is the impact of GDPR on finance when it comes to notification requirements?

A

Data breaches must be reported w/o delay

23
Q

What is the impact of GDPR on finance when it comes to data protection officers?

A

A data protection officer has to be nominated as a fixed role

24
Q

What is the impact of GDPR on finance when it comes to sanction?

A

You can get fined

25
Q

How does the PSD2 affect banks?

A

Mandates banks to open API access to fintechs

26
Q

How is big data reshaping finance?

A

Rise of algorithmic trading as a substitute for human-based decisions

27
Q

What is the david kahneman theory on loss aversion

A

The perceived value of loss is much greater than the perceived value of a comparable gain

28
Q

What was the de martino experiment?

A

They tested risk aversion of regular individuals and people with amygdala lesions who showed much less risk aversion than the control subjects

29
Q

Based on the foundings of the de martino experiment, what is the scientific explanation for risk aversion?

A

The amygdala, responsible for emotional responses such as fear

30
Q

What is confirmation bias?

A

favoring info that conforms to your existing beliefs

31
Q

What is availability heuristics?

A

placing greater value on info that comes to your mind quickly

32
Q

What is self-serving bias?

A

tendency to blame external factors when something goes wrong and give yourself credit when good things happen

33
Q

How can social norms and habits affect decision-making?

A

They can make us behave in irrational ways (see dirty doctors example)

34
Q

What is anchoring bias?

A

Tendency to rely too heavily on the first piece of information you find

35
Q

How is algorithmic trading affecting the market?

A

The market’s driven to great extent by machines making investment decisions and high frequency trading

36
Q

What are the pros of algorithmic trading?

A

Instantaneous decision
best price trades
objective criteria (no emotion)
no human mistake
ability to back test

37
Q

What are the cons of algorithmic trading?

A

No context taken into account
Back testing can be irrelevant
algorithms can go “mad”

38
Q

What are the main algorithmic trading strategies?

A

Trend following
Index fund rebalancing
Arbitrage
Trading range
Model based
Volume weighted
Time weighted
Percentage of volume

39
Q

What do you need for algorithmic strategies?

A

Algorithm & strategy
Computing power
Data access

Big Data (4 decks)

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