Bloomberg testing use of image recognition in volatility trading

Computers could be used to spot kinks in volatility surfaces

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The human eye "cannot accurately detect arbitrage" in a vol surface, Bloomberg argues

Researchers at Bloomberg are exploring ways to apply an image-recognition technique used by firms such as Facebook and Google to options and volatility trading.

The approach – employing machine-learning technology known as convolutional neural networks – could help traders identify arbitrage opportunities more efficiently, the firm thinks.

Their idea is to use the technology to scan for anomalies in the three-dimensional plots known as volatility surfaces used in the industry to show time to m