Jacob Ullman, associate product manager at Acadia, outlines how AI and chatbots are reshaping derivatives knowledge
In the world of technological evolution, one force undeniably stands out: AI. This formidable field of innovation has captivated global industries with its transformative potential.
The complex domain of financial derivatives, filled with its intricate terminologies and sophisticated mathematical models, is more than ready to utilise AI as a potent tool for shaping the future.
Imagine a world where it is effortless to ask a chatbot to ‘clarify the Bachelier Model,’ or ‘show the net present value formula for a European swap’, eliminating the necessity to consult quantitative researchers.
This paradigm shift in knowledge dissemination is nothing short of exhilarating. Nonetheless, challenges persist. How can we flawlessly integrate such cutting-edge AI solutions into the labyrinthine legacy systems of established banks that cover a broad spectrum of operations?
Like fitting square pegs into round holes, integrating advanced AI into the traditional financial landscape presents its own unique set of challenges and opportunities.
While most financial firms possess the essential data to address such complex inquiries, their infrastructure often lacks connectedness. Over the years, these institutions have experienced myriad acquisitions, cumbersome database migrations and an array of organisational changes.
Amidst this complex backdrop, Acadia has managed to carve a distinctive niche. Our suite of products, which operate within a unified, web-based architecture and data model, facilitates accessibility across all applications.
In doing so, this unique vantage point empowers us to focus on AI knowledge distribution and dispute management, while emphasising a responsible, human-centric approach to AI integration.
AI and finance: a dynamic duo
With its unparalleled ability to analyse colossal volumes of data, detect patterns and generate actionable insights, AI represents an unmatched opportunity to streamline operations, fortify risk management and enrich customer experiences.
The ceaseless progression in AI technology, evident in the creation of Bloomberg’s proprietary model, FinGPT, and numerous open-source models on platforms such as Hugging Face, is both awe-inspiring and invigorating.
From lending platforms like C3.ai aiming to help lenders approve more borrowers while lowering default rates, to investment apps such as Magnifi implementing a ChatGPT-style co-pilot to give personalised investment advice, AI is weaving its way through the fabric of many new companies.
Where AI might be seen as a cure-all for SaaS companies seeking innovation, Acadia has adopted a more balanced perspective. We view AI as an enabler to enhance human capability rather than a substitute. Recognising that responsible AI adoption needs to be human-centric, we should aim to uplift expertise, stimulate collaboration and foster a culture of continuous learning among our employees, instead of nurturing a generation that is already extremely reliant on AI.
Despite the intimidating challenge of integrating AI technologies into the vast legacy systems of banks, Acadia is optimally positioned. Our products cover the entire post-trade derivatives lifecycle and are built for firms subject to the uncleared margin rules (UMR). We provide a suite of services, including sensitivity pricing, exposure calculation, margin call generation, collateral eligibility determination and the orchestration of SWIFT messaging for settlement.
Acknowledging our unique standing, we’re exploring the untapped possibilities that AI can offer within our infrastructure.
Amplifying Acadia’s expertise with AI: a new era of knowledge dissemination
The centerpiece of Acadia’s AI-driven vision is the Acadia Expert ChatGPT-style application. This tool is set to improve knowledge transfer within our organisation. By training our AI-powered chatbot on a comprehensive suite of documents — spanning products, pricing, data formatting and FAQs — Acadia has created an intelligent repository of expertise. This innovation democratises access to crucial information and facilitates informed decision making.
Consider a scenario where a question is raised by a collateral team to our support line. In such a case, Acadia’s support team could leverage an AI-trained bot as the first line of response.
This does not merely yield a pre-formatted response; it delivers a profound understanding of pricing models, data formats and exposure calculation methodologies.
In the long run, we aim to extend this democratisation of knowledge to our clients, empowering them to independently navigate through intricate protocols, thereby fostering a culture of continuous learning.
Revolutionising dispute management with AI
Acadia’s exploration into AI-driven solutions extends into the pivotal realm of margin call dispute management. This domain requires speed and accuracy — two areas where well-trained AI shines.
When a margin call dispute arises, our AI system will delve into historical data and discern patterns to propose potential resolutions. Equipped with AI-generated insights, human experts can apply their industry knowledge and judgment to validate and implement the optimal resolution, marrying AI efficiency with human wisdom.
When a collateral operations person interacts with a counterparty, using real-time Acadia AI, we see a more unified resolution process. This not only standardises communication in the industry but also shortens time to settlement for a margin call.
Promoting responsible AI adoption
It is essential that Acadia carries out responsible AI adoption. Upholding this commitment requires the following:
- Robust training and education: Adhering to comprehensive AI ethics and best practice training to ensure employees understand the potential and limitations of AI and use it responsibly.
- AI oversight and governance: Establishing an internal governance framework to monitor AI models continually, promoting transparency, reducing biases and ensuring accountability.
- Human oversight and judgment: Emphasising the importance of human judgment in conjunction with AI-generated insights to maintain an active role in decision making. Using reinforcement learning as a feedback loop helps improve the model’s accuracy.
Beyond Acadia: The broader impact of AI solutions
As we navigate through the rapidly evolving technological landscape, Acadia is determined to lead the way in responsibly leveraging AI’s transformative potential. While the financial industry grapples with the daunting task of integrating AI into entrenched legacy systems, Acadia is already making strides to apply this technology in a meaningful and beneficial way. Our unique approach extends beyond mere technology integration; we emphasise the crucial role of human insight and expertise at every stage.
Our AI-powered solutions, already reshaping the way we understand and manage client queries, are the result of thoughtful integration. They are designed not just to automate tasks, but to augment human capabilities and improve decision making. This fosters a human-centric approach, continuous learning and collaboration. But our journey does not stop here. As we continue to explore the possibilities of AI, we also understand the imperative of promoting a broader understanding and acceptance of its presence within the financial sector. Therefore, we invite our peers, partners and clients to join us in embracing this AI-led revolution.
Let us collectively harness this technology to enhance our services and streamline operations to shape the financial industry’s future in a way that is both progressive and sustainable.
Together, we can fit the square peg of AI into the round hole of legacy systems to reshape the world of finance for the better.
