FICC Department of China Galaxy Securities Valuates Financial Assets and Builds Trading and Hedging Strategies
“Investments in fixed income, currency, and commodities require large amounts of quantitative analysis. MATLAB supports us with highly efficient development tools for the valuation of financial instruments, statistical analysis of financial data, and the building and backtesting of quantitative strategies.”
Challenge
Perform large amounts of complicated quantitative analysis under time pressure
Solution
Use MATLAB and its finance toolboxes to model and develop investment strategies
Results
- Run times reduced to a couple of minutes
- Quality of work improved
- Work efficiency increased
The FICC department of China Galaxy Securities applies MATLAB in their investment strategies.
China Galaxy Securities Co., Ltd. is a leading financial service provider publicly listed in Shanghai and Hong Kong with total assets of more than $70 billion. Its investment department manages over $14 billion in assets, mainly in the fixed-income sector, with diversified portfolios in the equity and commodities markets, as well as other bonds.
Given the accelerated pace of financial decisions and transactions in the digital age, the company needs to react quickly to market fluctuations. At the same time, investments in fixed income, currency, and commodities (FICC) today require increasingly complicated quantitative analysis. Today, the company’s FICC department uses MATLAB® to model and accelerate investment strategies.
“With the computational finance toolboxes in MATLAB, we now automate much of the quantitative data analysis that used to require manually-intensive, spreadsheet-driven processes,” says Xian Xingchi, vice president, FICC department of China Galaxy Securities.
Challenge
The FICC department needs to perform statistical analysis, establish pricing, and design trading strategies for various kinds of financial assets. This includes valuating; monitoring prices; backtesting quantitative strategies for credit default swaps, future contracts, and bonds; and visualizing the yield curve of bond products after statistical analysis.
Meanwhile, time pressure has only increased for financial services providers. They are required to react quickly to market fluctuations and update their strategies or build new ones accordingly.
Solution
The FICC department uses MATLAB and its computational finance toolboxes to automate and accelerate quantitative analysis, ensure accurate and timely documentation, and develop algorithms and strategies quickly.
For example, the company deals with thousands of interest rate swap (IRS) contracts a day. Using Datafeed Toolbox™, the FICC department retrieves multiple data sets from disparate service providers. They use the pricing and simulation libraries in Financial Toolbox™ and Financial Instruments Toolbox™ to price onshore IRS contracts denominated in Chinese yuan and derive parameters such as present value and DV01.
The company’s research teams can build and run arbitrage trading strategies in bonds and futures using advanced techniques available in Statistics and Machine Learning Toolbox™. With Parallel Computing Toolbox™, they can seamlessly scale and optimize parameter sweeps without code changes.
Results
- Run times reduced to a couple of minutes. “With MATLAB finance tools, valuation, risk management, and strategy building can be accomplished in a couple of minutes, which would be unimaginable if we were still limited to spreadsheets and manual processing,” says Mr. Xian.
- Quality of work improved. “Compared with other languages, it’s a lot easier to reduce bugs in our code with MATLAB,” says Mr. Xian. “With so many models and algorithms in the computational finance toolboxes and a user-friendly interface, we can perform and optimize parallel computation with just a few lines of code."
- Work efficiency increased. “Automation of data analysis and monitoring reduces the workload and greatly improves the efficiency in our work," says Mr. Xian.
