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Financial Markets

For the purpose of Faunus Analytics research the term «financial market» refers to securities and financial liabilities (shares, bonds, options, currency, etc.) markets. All markets comprise the following basic components:

  1. Subject of trading
  2. Trading floors, both particular stock exchanges (NYSE, NASDAQ, CME, ICE, LSE, RTS, etc.) and worldwide distributed electronic systems, for example, FOREX.
  3. Market participants, such as investment funds, government institutions, export and import organizations, private investors, traders, etc. All of them pursue their own aims. For example, from time to time banks readjust their currency exposure limits to mitigate their currency risks. Investors buy shares to influence the administration of companies, gain profit from the forecasted increase in the price of shares and dividends. Export and import organizations carry out exchange transactions to lead their activity. Government institutions can issue government bonds, influence the rate of the national currency, etc.

All this 24-hour activity and lots of extra fundamental factors make financial markets very complicated non-linear objects having strongly marked stochastic behavior. It is impossible to describe in full and predict exactly their behavior. Nevertheless, like in practically any stochastic system, it is possible to detect useful statistical trends and on their basis build efficient strategies and systems for successful solution of most investment tasks:

  • Forecasting of the rates of financial instruments with horizons of various duration (short-term, medium-term and long-term)
  • Financial scoring – risk assessment and making of decisions on inclusion of the instruments into the investment portfolio
  • Assessment of risks and profitability of investment portfolios
  • Creation of balanced investment portfolios
  • Risk hedging

Advanced analytics is widely used in research and forecasting of financial markets. Advanced analytics and knowledge of market instruments and industry specificity help investors to lead a more successful trade, manage risks and capital more effectively.

See also