To model the real world, quants turn to synthetic data

The financial models of the future will be built using artificially generated data

Black swans are like kryptonite to quants. When faced with extreme and unexpected events, their carefully constructed models seem to quickly lose their predictive power.

The coronavirus pandemic is another example of this. With consumers locked down and businesses in limbo, markets saw some of the largest daily swings in nearly a century. Quant models struggled to cope.

Trading losses repeatedly exceeded banks’ value-at-risk estimates, leading in some cases to procyclical capital add-ons in

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