BMO Harnesses AI Technology for Capital Markets Structured Note Pricing and Scenario Analysis

Rhea-AI Summary

BMO Financial Group has partnered with Riskfuel Analytics to enhance its structured derivatives pricing and scenario analysis. The collaboration aims to improve the valuation process for autocallable notes using deep learning technology, speeding up traditional methods that struggled with runtime challenges. This strategic alliance is expected to advance the accuracy of pricing models and enhance client services, ultimately driving higher trade flows and better product design. BMO's ongoing digital transformation emphasizes innovation through technology to meet evolving client needs.

Positive

• Partnership with Riskfuel Analytics enhances pricing models for structured derivatives, improving efficiency.
• Successful pilot project demonstrates speed improvements in valuation for autocallable notes.
• Collaboration enables better client service through accelerated pricing and complex hedging strategies.

Negative

• None.

• BMO working with Riskfuel Analytics to help clients make faster, better investment decisions 
• Successful pilot leveraged deep learning and fast neural nets to speed up valuation and pricing process 

TORONTO, Sept. 2, 2021 /PRNewswire/ - BMO Financial Group (TSX: BMO) (NYSE: BMO) and Riskfuel Analytics a Toronto-based start-up, today announced a partnership to develop models for pricing and scenario analysis of structured derivatives transactions. This comes following 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," said 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 this technology for front office pricing, BMO's 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. 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. Removing the runtime hurdle opens the door for significant advancements in accuracy and realism of structured notes pricing models," said Graham Wells, Managing Director and Head of Equity Quantitative Modeling in Global Markets Engineering, BMO Financial Group. 

"Riskfuel's leading tools and expertise will help us expand our client base, drive higher trade flows, generate new risk insights and lead to better product design and selection. This partnership is enabling us to assist our clients with more complex hedging strategies and, with accelerated pricing and analysis, help our clients make faster, smarter investment decisions," said Lucas Caliri, Managing Director and Head of Cross Asset Solutions, BMO Financial Group.

BMO continues to make bold moves to drive its digital first transformation, relentlessly innovating across its entire business -- from product, service, and platform design, to ensuring a scalable agile foundation across the bank, to developing solutions that meet client needs. This includes the dramatic acceleration of self-service, creating common cross channel experiences, the elimination of manual processes and a strong focus on technology in all our businesses, including BMO Capital Markets. BMO Capital Markets' 2020 acquisition of Clearpool, a New York-based electronic trading platform, has established BMO as a leader in electronic trading. 

About Riskfuel
Riskfuel builds AI solutions to accelerate valuation and risk sensitivity calculations. Founded in 2019 by capital markets experts, the company provides valuation solutions to banks and insurance companies in North America and Europe with use cases covering XVA, Risk, and Front Office analytics. For more information about Riskfuel, click here.

About BMO Financial Group
Serving customers for 200 years and counting, BMO is a highly diversified financial services provider - the 8th largest bank, by assets, in North America. With total assets of $971 billion as of July 31, 2021, and a team of diverse and highly engaged employees, BMO provides a broad range of personal and commercial banking, wealth management and investment banking products and services to more than 12 million customers and conducts business through three operating groups: Personal and Commercial Banking, BMO Wealth Management and BMO Capital Markets.

View original content:https://www.prnewswire.com/news-releases/bmo-harnesses-ai-technology-for-capital-markets-structured-note-pricing-and-scenario-analysis-301368132.html

SOURCE BMO Financial Group

FAQ

What is the purpose of BMO's partnership with Riskfuel Analytics?

BMO's partnership with Riskfuel Analytics aims to enhance pricing and scenario analysis for structured derivatives, improving efficiency and accuracy.

What technology is being used in BMO's new pricing models?

BMO is utilizing deep learning technology developed by Riskfuel Analytics to speed up the valuation process for structured products.

When was the partnership between BMO and Riskfuel announced?

The partnership was announced on September 2, 2021.

How will the partnership with Riskfuel impact BMO's services?

The partnership will allow BMO to assist clients with more complex hedging strategies and enable faster investment decisions.

What financial products are affected by BMO's new AI technology?

The new AI technology primarily affects the pricing of structured derivatives, including autocallable notes.