Spotting trends in financial market prices in these uncertain times is key. In volatile global markets, FX hedging is of increasing importance to corporate treasurers with sudden adverse exchange rate movements or persistent adverse trends taking their toll on what can be relatively narrow business profitability and with all of the inherent risks they bring.
Treasurers employ various strategies to monitor and manage those risks, which often depend upon the nature of the company’s core business and their assessment of the degree of risk they can carry. These strategies depend largely upon the quality and speed of market information available and the effectiveness and reliability of the tools at hand to analyse and act upon that data.
Spotting trends in Financial Market prices before other systems or people see them
With those problems in mind, a solution was introduced by AlgoDynamix, a company founded five years ago by a group of Cambridge PhD researchers, who now have clients around the world. AlgoDynamix describes their system as follows:
“AlgoDynamix is a very powerful system based upon Behavioural Economics (Thaler - Nobel Prize for Economics) which spots trends in Financial Market prices before other systems, or people, see them and sends “Flags” to users. The AlgoDynamix system takes direct feeds from exchanges and other trading venues around the world and, using a vast amount of computing power in the cloud, recognises clusters of similar trading behaviour and issues Flags which tell our clients that a price is going to go up in a time window of hours to days (an Up Flag) or down in a similar time frame (a Down Flag). As the behavioural trend approaches its end AlgoDynamix issues an End Flag. Whilst our calculations and AI take place in real-time in the cloud, flags are issued to our clients via e-mails, a browser or an API. The flags are designed to give clients warning of expected movements to enable them to be used to augment the client’s own strategy – be it trading or, in the case of Corporate Treasurers, currency hedging.” See examples below.
AlgoDynamix graph – AUDUSD
Source & Copyright©2020 - AlgoDynamix
AlgoDynamix graph - Gold
Source & Copyright©2020 - AlgoDynamix
The AlgoDynamix system now has clients using it around the world from Australia to California via Hong Kong, Europe and New York for both foreign exchange movement forecasting and commodity price movement forecasting
The company has recently announced a Quantum Computing enhancement to their Financial Markets Instrument price movement forecasting system which vastly improves their FX price movement prediction capabilities. The “AlgoDynamix Quantum Computing” solution has enabled an increase in computing speed of 10,000 times plus, which has enabled them to increase their FX price movement forecasting capability and cover many more FX instruments. The new system is currently running beta with an organisation in Germany which provides hedging advice and services to corporates.
Treasurers are often wary of software implementation times and resource required, as a result of past painful experience, but AlgoDynamix confirm that a new client can be up and running within days, or even hours because the AlgoDynamix system runs in the cloud, and consumes prices direct from exchanges and other venues around the world, and therefore does not disrupt a client’s internal IT infrastructure or require any client market data.
Ken Lillie, Lillie Associates was talking to Ian Hillier-Brook, Director of Sales at AlgoDynamix. His closing comments on the new Quantum Computing solution were:
- It provides considerable value in predicting FX price movements, which requires very complex calculations, and is a conundrum pored over by many corporate treasurers. So, it would certainly follow that these predictions would be very valuable to treasurers in implementing their currency hedging strategies and, very importantly, help to reduce hedging costs
- Treasurers are under increasing pressure to provide effective risk management as the breadth of those risks widens in the present uncertain times and this tool looks an interesting option for gathering fast and up to date trend data that should enable the necessary hedging decisions to be taken and speedily put into place.
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