Monte Carlo simulation is a technology that is used to to calculate the value and risk of portfolios of a wide variety of financial products such as mortgage backed securities, stock options, convertible bonds and variable annuity guarantees. Sometimes the value of these products are estimated using straight forward calculations that are limited when trying to understand the risk of an entire portfolio and thus, risk managers turn to Monte Carlo.
Several regulations such as CCAR and VACARVM require financial institutions to estimate financial risk that in some cases, can only be performed by Monte Carlo. In addition risk managers often need to estimate portfolio risk multiple times a day, using large infrastructures to perform these simulations as fast and as frequently as possible.
Financial institutions are investing cloud, GPU and quantum computing technology to find an edge in making these risk calculations faster.
"Quantum computers' unprecedented computation abilities could speed up Monte Carlo calculations by up to 1,000 times, according to research carried out by Goldman Sachs together with quantum computing company QC Ware. In even more promising news, Goldman Sachs' quantum engineers have now tweaked their algorithms to be able to run the Monte Carlo simulation on quantum hardware that could be available in as little as five years' time."
Overview of how I changed the world of financial simulation and risk management forever.
Faster and More Accurate
In one use case, our proprietary technology reduced a production risk computation that took 25 minutes on 64 GPU nodes (13 compute hours) to less than 1 minute on a laptop.
Faster means new capabilities. This breakthrough enables other technologies such as the ability to evaluate each trade on the basis of it's risk impact in real time.