Fintech + algorithmic trading

Question 1

How do fintechs use big data in their operations?

Answer 1

Customer clustering
Asset allocation
Risk Management
Fraud Detection
Authentication
Transactions

Question 2

Explain how would an insurance company use big data in their activities?

Answer 2

They need data on the customer (age, gender, medical history, criminal record), the insured product (type of product, usage, color for a car, etc), to determine how much they’re gonna make you pay for the insurance

Question 3

What is the Fintech ecosystem?

Answer 3

It’s very well-funded

Personal Finance (vanguard)
Regtech: (Regulatory services)
Digital bank services (revolut)
Payment services (paypal)
alt finance (bread)
insureance tech (lemonade)
blockchain (ethereum)
Digital ID veryfication (IDnow)

Question 4

What are the fintech sub sectors?

Answer 4

personal finance
payments
blockchain
lending
regtech
insurance
capital markets
wealth management
money transfer (wise)
Mortgage real estate

Question 5

What is an API?

Answer 5

it’s an interface by which computers can exchange information and instruction with one another w/o human intervention.

Question 6

What does API stand for?

Answer 6

Application Program Interface

Question 7

What is the most common API?

Answer 7

REST API, used on the World Wide Web

Question 8

How does API work?

Answer 8

The computer sends a request in JSON format which is then converted into HTTP through the different methods. The server receives it and sends a response in HTTP which gets conevrted into JSON

Question 9

What does REST API consist of?

Answer 9

server address and parameters

Question 10

How are APIs fueling the open banking revolution?

Answer 10

Different services can be aggregated using API.

With open banking, client and product data is shared among customers, banks, third-party providers and price comparison websites

Question 11

Why did the EU push for open banking?

Answer 11

To incentivize competition

Question 12

What is the impact of GDPR on finance when it comes to explicit consent?

Answer 12

stricter requirements on explicit consent

Question 13

How do insurance companies use AI?

Answer 13

Product innovation
Process optimization
Customer experience

Question 14

What are the regulations surrounding fintech?

Answer 14

GDPR
Banking regulations
Payment Directives (PSD2)

Question 15

What is the impact of GDPR on finance when it comes to territorial scope?

Answer 15

Much broader scope

Question 16

What is the impact of GDPR on finance when it comes to right of access?

Answer 16

Information on controller and the stored personal data must be provided

Question 17

What is the impact of GDPR on finance when it comes to right to rectification?

Answer 17

Incorrect data has to be rectified

Question 18

What is the impact of GDPR on finance when it comes to right to erasure?

Answer 18

delete data if it’s no longer required for the original purpose

Question 19

What are the recent trends on Fintech?

Answer 19

The funds raised for fintechs is growing exponentially.

The number of Fintech IPOs is increasing exponentially.

The number of fintechs founded every year is decreasing.

Question 19

What is the impact of GDPR on finance when it comes to right to data portability?

Answer 19

individuals can request copies of personal data

Question 20

What is the impact of GDPR on finance when it comes to DP by design and by default?

Answer 20

Develop default privacy protection mechanisms and implement monitoring processes

Question 21

What is the impact of GDPR on finance when it comes to processor?

Answer 21

Processing by 3rd parties must be governed by contract

Question 22

What is the impact of GDPR on finance when it comes to notification requirements?

Answer 22

Data breaches must be reported w/o delay

Question 23

What is the impact of GDPR on finance when it comes to data protection officers?

Answer 23

A data protection officer has to be nominated as a fixed role

Question 24

What is the impact of GDPR on finance when it comes to sanction?

Answer 24

You can get fined

Question 25

How does the PSD2 affect banks?

Answer 25

Mandates banks to open API access to fintechs

Question 26

How is big data reshaping finance?

Answer 26

Rise of algorithmic trading as a substitute for human-based decisions

Question 27

What is the david kahneman theory on loss aversion

Answer 27

The perceived value of loss is much greater than the perceived value of a comparable gain

Question 28

What was the de martino experiment?

Answer 28

They tested risk aversion of regular individuals and people with amygdala lesions who showed much less risk aversion than the control subjects

Question 29

Based on the foundings of the de martino experiment, what is the scientific explanation for risk aversion?

Answer 29

The amygdala, responsible for emotional responses such as fear

Question 30

What is confirmation bias?

Answer 30

favoring info that conforms to your existing beliefs

Question 31

What is availability heuristics?

Answer 31

placing greater value on info that comes to your mind quickly

Question 32

What is self-serving bias?

Answer 32

tendency to blame external factors when something goes wrong and give yourself credit when good things happen

Question 33

How can social norms and habits affect decision-making?

Answer 33

They can make us behave in irrational ways (see dirty doctors example)

Question 34

What is anchoring bias?

Answer 34

Tendency to rely too heavily on the first piece of information you find

Question 35

How is algorithmic trading affecting the market?

Answer 35

The market's driven to great extent by machines making investment decisions and high frequency trading

Question 36

What are the pros of algorithmic trading?

Answer 36

Instantaneous decision best price trades objective criteria (no emotion) no human mistake ability to back test

Question 37

What are the cons of algorithmic trading?

Answer 37

No context taken into account Back testing can be irrelevant algorithms can go "mad"

Question 38

What are the main algorithmic trading strategies?

Answer 38

Trend following Index fund rebalancing Arbitrage Trading range Model based Volume weighted Time weighted Percentage of volume

Question 39

What do you need for algorithmic strategies?

Answer 39

Algorithm & strategy Computing power Data access