Why Bond Traders Need to Up Their Game with AI?

Capital Markets CIO Outlook | Tuesday, December 10, 2019

AI’s potential in providing price discovery, liquidity risk management, pre-trade, and post-trade analytics is creating enthusiasm in the bond trading landscape.

FREMONT, CA: A trading bond is an integral part of global capital markets. However, the bond market was regarded as an old-fashioned corner of the financial system, with little transparency and trading often conducted by phone. But today, there is an accelerated shift towards technology, especially Artificial Intelligence (AI). AI has significant potential to revolutionize fixed-income trading. As traders admit the possibility of trusting vital trading decisions to AI systems, it's time to make use of its full potential.

The sophisticated algorithms and multi-market handling capabilities of trading platforms are no longer at the cutting edge of financial technology .

Bond trading is giving way to AI. AI systems with deep learning power can detect the reason and reason out outcomes, based on the data they take. AI techniques based on deep learning can accumulate the current active price of a bond from various sources. Predicting the price of the bond is one of the most common applications of AI. The bid price of a bond prediction can be done using historical transactions from which AI algorithms can form useful insights. Similar to e-commerce recommendations, AI can be used to recommend the bonds a trader should buy to make maximum profit.

A chatbot is used in several ways to provide smart assistance to customers. Financial institutions use it to assist customers from knowing the account balance to loan agility. Bond traders are using AI-powered chatbot to assist them in many ways, from making the trade to recommending the bonds, which are good to invest in. This can help in managing the portfolio of the trader, along with minimizing the risk involved in trading.    

Bond trading is well ripe with AI capabilities, making way for accuracy. Bond traders looking to adopt AI platforms must first recruit, train, and retain the appropriate human talent to handle the transition and deployment of this new technology.  

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