| Topic : Data Mining |
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Data Mining in Finance
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Source : http://www.iimahd.ernet.in
Activity:
2 comments
289 views
last activity : 07 06 2010 20:18:04 +0000
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Data mining plays a very important role in financial data analysis. lets have a quick look at the applications of data mining in finance.
- RISK MANAGEMENT
- PORTFOLIO MANAGEMENT
- TRADING
- CUSTOMER PROFILING AND CRM
RISK MANAGEMENT
Managing and measurement of risk is at the core of every financial institution. Today’s major challenge in the banking and insurance world is therefore the
implementation of risk management systems in order to identify, measure, and control business exposure. Here credit and market risk present the central challenge, one can observe a major change in the area of how to measure and deal with them, based on
the advent of advanced database and data mining technology.
PORTFOLIO MANAGEMENT
With the data mining and optimization techniques investors are able to allocate capital across trading activities to maximise profit or minimise risk. This feature supports the ability to generate trade recommendations and portfolio structuring from user supplied
profit and risk requirement.
TRADING
The goal of this technique is to spot times when markets are cheap or expensive by identifying the factor that are important in determining market returns. The trading system examines the relationship between relevant information and piece of financial assets, and gives you buy or sell recommendations when they suspect an under or overvaluation. Thus, even if some traders find the data mining approach too mechanical or too risky to be used systematically, they may want to use it selectively as further opinion.
CUSTOMER PROFILING AND CRM
Customer profiling is a data mining process that builds customer profiles of different groups from the company’s existing customer database. The information obtained from this process can be used for different purposes, such as understanding business performance, making new marketing initiatives, market segmentation, risk analysis and revising company customer policies. The advantage of data mining is that it can handle large amounts of data and learn inherent structures and patterns in data. It can generate rules and models that are useful in enabling decisions that can be applied to
future cases.
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