Can quantitative finance benefit from IoT?

Abstract

The Internet of Things (IoT) is a novel paradigm that communicates information among smart devices that are connected to the Internet. In this context, such devices would leverage our understanding and capabilities of big data, deep analysis and artificial intelligence to solve problems in real-time. The IoT paradigm has successfully benefited many applications in the social sciences and industries. However, in the rise of IoT, there is at least one question that has been left unanswered: Can Quantitative Finance (QF) benefit from IoT? The QF is a field that extends sophisticated mathematical models and utilizes advanced computer techniques to link with global finance markets. By taking market and social information as input, a QF model can derive profitable insights and control the risk to make trading decisions. Today, many Internet-based techniques are extensively employed in the field as: (a) market and social data is provided via Internet; (b) big data infrastructures are built in the Cloud; and (c) deep learning tools are accessible in Internet. Even trading models and strategies could be exerted through Internet. In this paper, we will provide an overview of challenges and opportunities presented by this new paradigm in the QF industry. To unlock the potential of IoT, a system architecture, termed QuantCloud, is proposed for modern quantitative trading firms in the field.