Big Data Beyond The Hype - Amazon S3 · Data Science allows us to make decisions based on...
Transcript of Big Data Beyond The Hype - Amazon S3 · Data Science allows us to make decisions based on...
How Data Science Can Help Finance Professionals Make Better Decisions
Big Data Beyond The Hype
Terms and Conditions
Distributing, copying, sharing, duplicating, and/or altering this file in any way is prohibited without the expressed written consent of Cognitir LLC.
© Copyright 2016 Cognitir LLC. All Rights Reserved.• Authors: David Haber and Neal Kumar• www.cognitir.com
2Copyright 2016 Cognitir LLC. All Rights Reserved.
Who We Are
David HaberCo-Founder & CPO
Neal Kumar, CFACo-Founder & CEO
@cognitir Cognitir Cognitir
3Copyright 2016 Cognitir LLC. All Rights Reserved.
Digital “Exhaust” Data
2.5 quintillion bytesEvery day, we create 2.5 quintillion bytes of data — so much that 90% of the data in the world today has been
created in the last two years alone.Source: IBM
4Copyright 2016 Cognitir LLC. All Rights Reserved.
Digital “Exhaust” Data (cont’d)
In fact, we are generating so much data that it’s physically impossible to store it all.
Financial services sectors, including securities and investment services and
banking, have the most digital data stored per firm on average.
Source: McKinsey Global Institute
5Copyright 2016 Cognitir LLC. All Rights Reserved.
Big Data
Big Data refers to datasets that are too large for traditional systems to capture,
store, manage, and analyze.
6Copyright 2016 Cognitir LLC. All Rights Reserved.
Relevance
Source: McKinsey Global Institute
7Copyright 2016 Cognitir LLC. All Rights Reserved.
Relevance (cont’d)
Source: McKinsey Global Institute
8Copyright 2016 Cognitir LLC. All Rights Reserved.
Data Science
Data Science is the art of extracting useful knowledge from data.
DataScience
Statistics
MachineLearning
SoftwareEngineering
DomainExpertise
DataEngineering
Mathematics
9Copyright 2016 Cognitir LLC. All Rights Reserved.
How can Data Science help us make better decisions?
Data Science allows us to make decisions based on historical data rather than on a hunch.
– A traditional venture capitalist could select investments based on her experience andintuition.
– Or, using DDD, she could base her selection based on an analysis of past successful companies. Source: Data Science for Business, Provost & Fawcett
10Copyright 2016 Cognitir LLC. All Rights Reserved.
Data Science Methods
Source: Data Science for Business, Provost & Fawcett
11Copyright 2016 Cognitir LLC. All Rights Reserved.
Data Science Methods (cont’d)
Methods to learn a model generally fall into two groups:
• In supervised learning, we want to learn relationships between input (features) and output variables (target).
• If we don’t have a specific target, the learning problem is called unsupervised.
12Copyright 2016 Cognitir LLC. All Rights Reserved.
Data Science Methods (cont’d)
Classification involves predicting a categorical (often binary) target value based on historical data.
What is the likelihood that a new customer will default on his loan?
Source: Data Science for Business, Provost & Fawcett
13Copyright 2016 Cognitir LLC. All Rights Reserved.
Data Science Methods (cont’d)
Regression involves predicting numeric/continuous target values based on historical data.
If we target customers x with new financial products y, how much will our sales likely increase?
14Copyright 2016 Cognitir LLC. All Rights Reserved.
Clustering attempts to find natural subgroups in our data.
Can we find similarities/patterns in historical stock data?
Data Science Methods (cont’d)
Data Step 1 Iteration 1, Step 2a
Iteration 1, Step 2b Iteration 2, Step 2a Final Results
15Copyright 2016 Cognitir LLC. All Rights Reserved.
Data Science Methods (cont’d)
Co-occurrence grouping attempts to find associations between entities based on transactions involving them.
Which financial products are commonly purchased together?
16Copyright 2016 Cognitir LLC. All Rights Reserved.
Data Science Methods (cont’d)
Similarity matching attempts to identify similar individuals/entities based on knowndata.– Which companies are similar to our best business
customers so that we can focus our sales resources on the best opportunities?
Profiling attempts to characterize the typical behavior of an individual, group, or population.– What are the characteristics of businesses that
are considered our best customers?– What are the characteristics of those who will
most likely default on loans?
17Copyright 2016 Cognitir LLC. All Rights Reserved.
Data Science Methods (cont’d)
Ensemble Learning
Neural NetworksNatural Language Processing
Sentiment Analysis
Time Series Analysis
Genetic Algorithms
Optimization
Crowdsourcing
A/B Testing
Dimensionality Reduction
18Copyright 2016 Cognitir LLC. All Rights Reserved.
Interlude
Demo
19Copyright 2016 Cognitir LLC. All Rights Reserved.
Applications in Finance, Fintech, and Economics
Use of credit decision technology to provide access to credit for people with little or no credit history.
20
“Banking the Underbanked”
Source: kreditech.com
Copyright 2016 Cognitir LLC. All Rights Reserved.
Applications in Finance, Fintech, and Economics (cont’d)
Analysis of massive amounts of data to create unparalleledinvestment strategies.
21
Open invite hack sessions where people around the world can submit trading algorithms and profit share if such algorithms are successful
Copyright 2016 Cognitir LLC. All Rights Reserved.
Applications in Finance, Fintech, and Economics (cont’d)
22
Angel and VC investors are utilizing data science to help improve odds that they are investing in winning ideas.
Robo-advisors are online wealth management services that provide automated, algorithm-based portfolio management advice.
Copyright 2016 Cognitir LLC. All Rights Reserved.
Applications in Finance, Fintech, and Economics (cont’d)
23
FP&A and PE Portfolio companies are using data science to boost top lines and improve efficiency.
Economic consulting firms and macroeconomic forecasting teams within companies and financial institutions use data science to help predict leading economic indicators.
Copyright 2016 Cognitir LLC. All Rights Reserved.
Other select applications of data science to finance, fintech, and economics include:• Financial product sales:• New products to existing customers• New customers based on profiles of existing
customers• Portfolio Risk Management• VaR
• Bitcoin / Blockchain• Cloud-based mining
• Corporate Finance• Cost of capital sensitivities (e.g., Beta)• Selection of comparable companies for relative
valuation• “Strategic alternatives event effects” prediction
Applications in Finance, Fintech, and Economics (cont’d)
24Copyright 2016 Cognitir LLC. All Rights Reserved.
Capturing the Full Potential of Big Data
Source: McKinsey Global Institute
25Copyright 2016 Cognitir LLC. All Rights Reserved.
Thank you!
@cognitir Cognitir Cognitir
www.cognitir.com
26Copyright 2016 Cognitir LLC. All Rights Reserved.