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Hadoop for Finance Essentials by Rajiv Tiwari

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Project details – risk simulations in the cloud

Value at Risk (VaR) is a very effective method to calculate the financial risk of a portfolio. Monte Carlo is one of the methods used to generate the financial risk for a number of computer-generated scenarios. The effectiveness of this method depends on running as many scenarios as possible.

Currently, a bank runs the credit-risk Monte Carlo simulation to calculate the VaR with complex algorithms to simulate diverse risk scenarios in order to evaluate the risk metrics of its clients. The simulation requires high computational power with millions of computer-generated simulations; even with high-end computers, it takes 20–30 hours to run the application, which is both time consuming and expensive. ...

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