Risk Modelling

TL;DR for operators Risk teams do not only need more samples. They need samples from the part of the distribution that almost never appears until it ruins the quarter, the grid, the model launch, or the compliance meeting. The paper behind this article, Quantum enhanced rare event discovery and sampling, proposes a quantum algorithm for doing exactly that: sample from outcomes whose probabilities are below a threshold $\Delta$, without first identifying the rare set by brute force.1 ...

TL;DR for operators Financial institutions do not suffer from a shortage of market ticks in the abstract. They suffer from a shortage of repeated histories. There is only one realised S&P 500 path, one realised liquidity crisis, one realised volatility regime sequence. Synthetic data is attractive because it promises more examples of rare-but-important behaviour without waiting politely for the next crisis to arrive. ...