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RiskFuel Partnership Fuels BMO Structured Investment Pricing

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BMO is partnering with RiskFuel, a Toronto based FinTech start up, to allow BMO clients to make better, faster investments. Following a successful pilot project, RiskFuel was able to use deep learning and neural networks (specific types of Artificial Intelligence) to simulate an extremely large number of possible future scenarios in the financial markets. Previously, this kind of simulation involved slow and expensive numerical techniques. This partnership will allow BMO to reduce its reliance on traditional financial models when calculating the pricing and risks of structured derivatives transactions.

Structured derivative transactions are complex grouped financial instruments. An example of such a transaction are autocallable notes – an investment note that has been structured and issued by a bank, and the underlying asset has been measured and evaluated at different intervals. RiskFuel replaces the traditional processes used to measure and evaluate the underlying assets by using AI to more accurately predict the values of these underlying assets. This increased accuracy allows for more reliable pricing and risk sensitivity calculations.

“This partnership is enabling us to assist our clients with more complex hedging strategies and, with accelerated pricing and analysis, help our clients make faster, smarter investment decisions," said Lucas Caliri, Managing Director and Head of Cross Asset Solutions, BMO Financial Group. BMO expects that this partnership will expand their client base, increase trade flows, and lead to better products overall.

Author: Hannah Johnson, 2021/2022 Articling Student-at-law

Photo Credit: https://unsplash.com/@austindistel

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