Like fast convergence, application of the SUV magic dust could be far-reaching. The delta-hedging mechanism can be tailored to improve performance for asset owners’ bespoke call-selling activities. It’s a level of inventiveness rivals haven’t been able to match, according to another pension client. “They came up with something that is very, very clever and others haven’t. This gave us better performance while still maintaining the spirit of what we are trying to do, so it’s still very much a hedge.”
Momentum robots
With an $11 billion annual IT budget, it’s little surprise BofA is also giving machine learning technologies a spin under the watchful eye of the digital innovation group. The first crop of products to market include the Dynamically Diversified Momentum (DDM) index. Live since mid-2018, the strategy aims to address another conundrum – the so-called ‘Curse of Markowitz’. Nobel prizewinning economist Harry Markowitz quantified the benefits of diversification in his pioneering work in the 1950s, which remains the basis of modern portfolio theory.
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