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Big Data Applications in Finance

Instructor: Kaitlin Oglesby
Few other industries have capitalized on the opportunities offered by big data like finance has. In this lesson, we'll see a few of the ways that financial companies are making the most of big data, such as automated trading, while also touching on some of the drawbacks.

Big Data in Finance

If there is an industry that craves data, it is finance. Open any typical stock report and you'll immediately see why. Everything on the page is dedicated to providing investors with as much information as possible about the stock or bond in question. In fact, they often link to the latest news stories, in addition to showing various price points of the past several years.

Simply put, the sort of analytics we can use in big data was made for finance. Given the incredible amount of information already being managed in the field, it is no surprise that financial professionals thrive off the new conclusions that they can draw from big data in finance. However, as with most things, there are points of concern that must be addressed.

We'll start by looking at how big data has come to be incorporated into finance.

Automated Trading

In finance, time is money. In fact, some trading firms have legacy wireless microwave technology that transmits the latest trading information because it will arrive a few fractions of a second before a fast high speed internet connection. Big data allows real time analysis to be run on those figures as they come in. By using real time analysis, decisions on investments can be made that instant. This allows for better amounts of automated trading, or situations in which computers handle all the hard work. People just are there to sign the paperwork. This development has streamlined the trading process.

Derivatives

If you follow financial markets, chances are you've heard the word 'derivative' thrown around. Chances are that you at one point were left scratching your head about it. In the simplest terms, a derivative is an agreement to sell something at a given time and at a given price. Big data allows those prices to be more accurately predicted. More accurate prices mean that companies are better able to secure the prices that they want for the goods or services that are being traded as a derivative and hopefully make a profit along the way.

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