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 High-Performance
Computing in Finance
Problems, Methods,
and Solutions
 High-Performance
Computing in Finance
Problems, Methods,
and Solutions

Edited by
M. A. H. Dempster
Juho Kanniainen
John Keane
Erik Vynckier
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Library of Congress Cataloging-in-Publication Data

Names: Dempster, M. A. H. (Michael Alan Howarth), 1938- editor. | Kanniainen,

Juho editor. | Keane, John. editor. | Vynckier, Erik. editor.
Title: High-performance computing in finance : problems, methods, and
solutions / [edited by] M.A.H. Dempster [and three others].
Description: Boca Raton, FL : CRC Press, 2018.
Identifiers: LCCN 2017052035| ISBN 9781482299663 (hardback) | ISBN
9781315372006 (ebook)
Subjects: LCSH: Finance--Mathematical models. | Finance--Data processing.
Classification: LCC HG106 .H544 2018 | DDC 332.01/5118--dc23
LC record available at https://lccn.loc.gov/2017052035

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Contents

Editors xi

Contributors xiii

Introduction xvii

I Computationally Expensive Problems in the

Financial Industry 1

1 Computationally Expensive Problems in Investment

Banking 3
Jonathan Rosen, Christian Kahl, Russell Goyder, and Mark Gibbs

2 Using Market Sentiment to Enhance Second-Order

Stochastic Dominance Trading Models 25
Gautam Mitra, Christina Erlwein-Sayer, Cristiano Arbex Valle,
and Xiang Yu

3 The Alpha Engine: Designing an Automated Trading

Algorithm 49
Anton Golub, James B. Glattfelder, and Richard B. Olsen

4 Portfolio Liquidation and Ambiguity Aversion 77

Álvaro Cartea, Ryan Donnelly, and Sebastian Jaimungal

5 Challenges in Scenario Generation: Modeling Market

and Non-Market Risks in Insurance 115
Douglas McLean

II Numerical Methods in Financial

High-Performance Computing (HPC) 173

6 Finite Difference Methods for Medium- and

High-Dimensional Derivative Pricing PDEs 175
Christoph Reisinger and Rasmus Wissmann

vii
viii Contents

7 Multilevel Monte Carlo Methods for Applications

in Finance 197
Michael B. Giles and Lukasz Szpruch

8 Fourier and Wavelet Option Pricing Methods 249

Stefanus C. Maree, Luis Ortiz-Gracia, and Cornelis W. Oosterlee

9 A Practical Robust Long-Term Yield Curve Model 273

M. A. H. Dempster, Elena A. Medova, Igor Osmolovskiy, and
Philipp Ustinov

10 Algorithmic Differentiation 315

Uwe Naumann, Jonathan Hüser, Jens Deussen,
and Jacques du Toit

11 Case Studies of Real-Time Risk Management

via Adjoint Algorithmic Differentiation (AAD) 339
Luca Capriotti and Jacky Lee

12 Tackling Reinsurance Contract Optimization

by Means of Evolutionary Algorithms and HPC 371
Omar Andres Carmona Cortes and Andrew Rau-Chaplin

13 Evaluating Blockchain Implementation of Clearing

and Settlement at the IATA Clearing House 391
Sergey Ivliev, Yulia Mizgireva, and Juan Ivan Martin

III HPC Systems: Hardware, Software, and

Data with Financial Applications 411

14 Supercomputers 413
Peter Schober

15 Multiscale Dataflow Computing in Finance 441

Oskar Mencer, Brian Boucher, Gary Robinson, Jon Gregory,
and Georgi Gaydadjiev

16 Manycore Parallel Computation 471

John Ashley and Mark Joshi

17 Practitioner’s Guide on the Use of Cloud Computing

in Finance 509
Binghuan Lin, Rainer Wehkamp, and Juho Kanniainen
 Contents ix

18 Blockchains and Distributed Ledgers in Retrospective

and Perspective 537
Alexander Lipton

19 Optimal Feature Selection Using a Quantum Annealer 561

Andrew Milne, Mark Rounds, and Peter Goddard

Index 589
Editors

Michael Dempster is Professor Emeritus, Centre for Financial Research,

University of Cambridge. He has held research and teaching appointments
at leading universities globally and is founding editor-in-chief of Quantitative
Finance. His numerous papers and books have won several awards, and he
is Honorary Fellow of the IFoA, Member of the Academia dei Lincei, and
managing director of Cambridge Systems Associates.

Juho Kanniainen is Professor of Financial Engineering at Tampere Uni-

versity of Technology, Finland. He has served as coordinator of two inter-
national EU-programs: HPC in Finance (www.hpcfinance.eu) and Big Data
in Finance (www.bigdatafinance.eu). His research is broadly in quantitative
finance, focusing on computationally expensive problems and data-driven
approaches.

John Keane is Professor of Data Engineering in the School of Computer

Science at the University of Manchester, UK. As part of the UK government’s
Foresight Project, The Future of Computer Trading in Financial Markets,
he co-authored a commissioned economic impact assessment review. He has
been involved in both the EU HPC in Finance and Big Data in Finance
programs. His wider research interests are data and decision analytics and
related performance aspects.

Erik Vynckier is board member of Foresters Friendly Society, partner of

InsurTech Venture Partners, and chief investment officer of Eli Global, fol-
lowing a career in banking, insurance, asset management, and petrochemical
industry. He co-founded EU initiatives on high performance computing and
big data in finance. Erik graduated as MBA at London Business School and
as chemical engineer at Universiteit Gent.

xi
Contributors

John Ashley Ryan Donnelly

NVIDIA Swiss Finance Institute
Santa Clara, California École Polytechnique Fédérale de
Lausanne
Brian Boucher Switzerland

Luca Capriotti
Quantitative Strategies Jacques du Toit
Investment Banking Division The Numerical Algorithms Group
and Ltd.
Department of Mathematics United Kingdom
University College London
London, United Kingdom Christina Erlwein-Sayer
OptiRisk Systems
Álvaro Cartea
Mathematical Institute
Oxford-Man Institute of Georgi Gaydadjiev
Quantitative Finance
University of Oxford Mark Gibbs
Oxford, United Kingdom Quantitative Research
FINCAD
Omar Andres Carmona Cortes
Computation Department
Instituto Federal do Maranhão Michael B. Giles
São Luis, Brazil Mathematical Institute
University of Oxford
M. A. H. Dempster Oxford, United Kingdom
Centre for Financial Research
University of Cambridge James B. Glattfelder
and Department of Banking and Finance
Cambridge Systems Associates University of Zurich
Cambridge, United Kingdom Zurich, Switzerland
Jens Deussen
Department of Computer Science Peter Goddard
RWTH Aachen University 1QBit
Germany Vancouver, Canada

xiii
xiv Contributors

Anton Golub Binghuan Lin

Lykke Corporation Tampere University of Technology
Zug, Switzerland Tampere, Finland

Russell Goyder
Alexander Lipton
Quantitative Research
Stronghold Labs
FINCAD
Chicago, Illinois
Jon Gregory and
MIT Connection Science and
Jonathan Hüser
Engineering
Department of Computer Science
Cambridge, Massachusetts
RWTH Aachen University
Germany
Stefanus C. Maree
Sergey Ivliev Centrum Wiskunde & Informatica
Lykke Corporation Amsterdam, The Netherlands
Switzerland
and Juan Ivan Martin
International Air Transport
Laboratory of Cryptoeconomics and Association
Blockchain Systems
Perm State University
Russia Douglas McLean
Moody’s Analytics
Sebastian Jaimungal Edinburgh, Scotland,
Department of Statistical Sciences United Kingdom
University of Toronto
Canada Elena A. Medova
Centre for Financial Research
Mark Joshi
University of Cambridge
Department of Economics
and
University of Melbourne
Cambridge Systems Associates
Melbourne, Australia
Cambridge, United Kingdom
Christian Kahl
Quantitative Research Oskar Mencer
FINCAD
Andrew Milne
Juho Kanniainen
1QBit
Tampere University of Technology
Vancouver, Canada
Tampere, Finland

Jacky Lee Gautam Mitra

Quantitative Strategies OptiRisk Systems and Department
Investment Banking Division of Computer Science
New York UCL, London, United Kingdom
 Contributors xv

Yulia Mizgireva Christoph Reisinger

Lykke Corporation Mathematical Institute
Switzerland and
and Oxford-Man Institute of
Quantitative Finance
Laboratory of Cryptoeconomics and University of Oxford
Blockchain Systems United Kingdom
Perm State University
Russia Gary Robinson
and Jonathan Rosen
Department of Mathematics Quantitative Research
Ariel University FINCAD
Israel
Mark Rounds
Uwe Naumann 1QBit
The Numerical Algorithms Group Vancouver, Canada
Ltd.
Peter Schober
United Kingdom
Goethe University Frankfurt
Chair of Investment
Richard B. Olsen
Portfolio Management and Pension
Lykke Corporation
Finance
Zug, Switzerland
Frankfurt, Hesse, Germany
Cornelis W. Oosterlee Lukasz Szpruch
Centrum Wiskunde & School of Mathematics
Informatica University of Edinburgh
Amsterdam, The Netherlands Edinburgh, United Kingdom
and
Philipp Ustinov
Delft Institute of Applied Cambridge Systems Associates
Mathematics Cambridge, United Kingdom
Delft University of Technology
Delft, The Netherlands Cristiano Arbex Valle
OptiRisk Systems
Luis Ortiz-Gracia United Kingdom
Department of Econometrics
University of Barcelona Rainer Wehkamp
Barcelona, Spain Techila Technologies Limited
Tampere, Finland
Igor Osmolovskiy
Rasmus Wissmann
Cambridge Systems Associates
Mathematical Institute
Cambridge, United Kingdom
University of Oxford
Oxford, United Kingdom
Andrew Rau-Chaplin
Faculty of Computer Science Xiang Yu
Dalhousie University OptiRisk Systems
Halifax, NS, Canada United Kingdom
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