Citi quants’ AI model aims to hedge earnings surprises
Machine learning tool forecasts effect of shocks on implied volatility surfaces in minutes
Facebook owner Meta scored its biggest ever one-day loss in market value on February 2 this year, shedding a fifth of its worth after a disappointing earnings announcement. Two days later, Amazon recorded the biggest one-day gain – a 13% rise – after a positive announcement.
Such moves are the stuff of nightmares for options traders, who must hedge against the price moves such surprises can cause.
Quants at Citi have built a model that can help.
“It gives us a better idea of how our book is
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