Neuberger sidesteps option gap risk using AI and credit card data

Random-forest algorithm run on retail transaction data forewarns of earning shocks

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Quants at Neuberger Berman Breton Hill have started using the machine learning technique random forest in the firm’s options-selling strategies to avoid fallout from big market jolts.

Rapid price moves triggered by earnings surprises are one of the biggest risks to the strategy, which mostly entails selling equity options, says Ray Carroll, chief investment officer of Neuberger Berman Breton Hill, NB’s quant group.

By running credit card data on the underlying names of its option holdings

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