Computationally intense financial research made possible by Entropia's global Grid of PCsSan Diego 05 April 2001 Entropia launched SaferMarkets, a joint effort with financial experts to predict stock market volatility. Entropia's global distributed computing grid of PCs will provide the power to enable this computationally intensive project for researchers at the William E. Simon Graduate School of Business Administration at the University of Rochester.
The launch of the SaferMarkets project occurs as millions of people worldwide
feel the impact of the significant downturn in world stock markets. SaferMarkets
offers people around the globe the unique opportunity to accelerate research to
make markets safer by applying their PCs' unused processing time to the project.
The more people that join the distributed computing grid, the more computing
power that will be available for the research, with results obtained that much
faster. Entropia's grid can support literally millions of PCs, providing as much
as tens of teraflops of computing power, more than the combined processing power
of the world's most powerful supercomputers. People can join the effort simply
by downloading free software . The software runs
completely unobtrusively, applying unused processing power to the research even
while the PC is being used.
The SaferMarkets project will be deployed in three phases. In Phase I, simulated
historical data will be created and analyzed to test and refine mathematical
formulas for predicting the probability, degree and duration of future market
volatility. In Phase II, researchers will run the best formulas identified in
Phase I against historical data from the NASDAQ 100 and S and P 500 indices and five
currency exchanges against the U.S. dollar. The final phase will explore
applicability of these formulas to individual equities.
The model that will be used is based on the concept of stochastic volatility,
which is capable of explaining the frequencies of ordinary and extreme market
movements. Stochastic volatility models can help investors allocate assets
between stocks and bonds, reduce a variety of economic risks and understand the
link between volatility and expected rates of return. Results will allow
accurate quantification and management of risk in equity, fixed income and
currency investments, thereby leading to safer markets.
The predictive modeling used in the SaferMarkets project typifies applications
in financial services and insurance, where time literally is money. Distributed
computing vastly reduces the time to perform calculations involved in risk
analysis, modeling and simulation. One example is pricing and hedging of large
portfolios of financial securities, such as derivatives, which in some cases can
take more time than the enterprise can afford.
The Simon School is ranked No. 21 among the top U.S. business schools by
Business Week and Forbes magazines. It is ranked No. 26 in the U.S. by U.S. News
and World Report, and No. 29 among the top 100 business schools in the world by
the Financial Times of London. With one of the most highly regarded faculties in
the country, the Simon School is one of the nation's premier research
institutions. The School is recognized for its leading scholarship in management
and its distinctive approach to business education through the rigorous use of
economic principles as an integrating discipline for research and education.
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