### Phase 2: Advanced Financial Models & Risk Management

[drzo]

Phase 2: Advanced Financial Models & Risk Management (Months 4-6)

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Feature Issue #4: Quantitative Finance Models

Priority: High
Estimated Effort: 8-10 weeks
Dependencies: Hardware acceleration, market data

Description: Implement sophisticated quantitative finance models using hardware-accelerated tensor operations for pricing, risk management, and portfolio optimization.

Actionable Tasks:

• Task 4.1: Options Pricing Models

  • Implement Black-Scholes model with Greeks calculation
  • Add binomial and trinomial tree models
  • Create Monte Carlo simulation engine for exotic options
  • Implement volatility surface interpolation and extrapolation
  • Deliverable: Options pricing library with 20+ models
  • Testing: Price validation against market data
  • Validation: Process 10,000+ option chains in <1 second

• Task 4.2: Risk Management Engine

  • Implement Value at Risk (VaR) calculations (Historical, Parametric, Monte Carlo)
  • Add Expected Shortfall (ES) and stress testing
  • Create portfolio risk attribution and decomposition
  • Implement real-time risk monitoring and alerts
  • Deliverable: Risk engine with real-time portfolio monitoring
  • Testing: Risk model backtesting and validation
  • Validation: Calculate portfolio risk for 100,000+ positions in <5 seconds

• Task 4.3: Portfolio Optimization

  • Implement Markowitz mean-variance optimization
  • Add Black-Litterman model for asset allocation
  • Create multi-objective optimization with constraints
  • Implement risk parity and factor-based strategies
  • Deliverable: Portfolio optimizer with multiple strategies
  • Testing: Optimization accuracy and convergence tests
  • Validation: Optimize 1,000+ asset portfolios in <10 seconds

• Task 4.4: Fixed Income Analytics

  • Implement yield curve construction and interpolation
  • Add bond pricing with embedded options
  • Create duration and convexity calculations
  • Implement credit risk modeling (structural and reduced-form)
  • Deliverable: Fixed income analytics library
  • Testing: Price validation against bond market data
  • Validation: Price 10,000+ bonds with curves in <2 seconds

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Feature Issue #5: Machine Learning Integration

Priority: Medium
Estimated Effort: 6-8 weeks
Dependencies: Quantitative models, market data

Description: Integrate machine learning models for predictive analytics, algorithmic trading, and enhanced risk management using GGML's ML capabilities.

Actionable Tasks:

• Task 5.1: Market Prediction Models

  • Implement LSTM/GRU models for price prediction
  • Add transformer models for market sentiment analysis
  • Create ensemble methods for prediction aggregation
  • Implement feature engineering for financial time series
  • Deliverable: ML prediction system with multiple models
  • Testing: Prediction accuracy backtesting
  • Validation: Real-time predictions with <50ms latency

• Task 5.2: Algorithmic Trading Strategies

  • Implement reinforcement learning for trading agents
  • Add technical analysis indicators with ML enhancement
  • Create market microstructure analysis
  • Implement execution algorithms (TWAP, VWAP, Implementation Shortfall)
  • Deliverable: Algorithmic trading framework
  • Testing: Strategy backtesting and risk analysis
  • Validation: Execute strategies with <100μs decision time

• Task 5.3: Fraud Detection & Anomaly Detection

  • Implement transaction fraud detection using ML
  • Add market manipulation detection algorithms
  • Create anomaly detection for trading patterns
  • Implement real-time risk scoring for transactions
  • Deliverable: Fraud detection system with real-time scoring
  • Testing: False positive/negative rate optimization
  • Validation: Process 1M+ transactions/hour with <1% false positives

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Feature Issue #6: Regulatory Compliance Engine

Priority: Critical
Estimated Effort: 6-8 weeks
Dependencies: Core financial engine

Description: Build comprehensive regulatory compliance system supporting multiple jurisdictions with automated reporting and audit trails.

Actionable Tasks:

• Task 6.1: SOX Compliance Implementation

  • Implement immutable audit trails with cryptographic integrity
  • Add segregation of duties enforcement
  • Create automated financial controls testing
  • Implement change management workflows
  • Deliverable: SOX-compliant audit system
  • Testing: Audit trail integrity and tamper detection
  • Validation: 7-year audit trail retention with instant retrieval

• Task 6.2: Basel III Capital Requirements

  • Implement risk-weighted asset calculations
  • Add capital adequacy ratio monitoring
  • Create stress testing scenarios
  • Implement regulatory capital reporting
  • Deliverable: Basel III compliance module
  • Testing: Regulatory calculation accuracy
  • Validation: Real-time capital ratio monitoring for large portfolios

• Task 6.3: MiFID II Transaction Reporting

  • Implement trade reporting to regulatory systems
  • Add best execution monitoring and reporting
  • Create systematic internalizer compliance
  • Implement market transparency requirements
  • Deliverable: MiFID II compliance system
  • Testing: Report accuracy and timeliness validation
  • Validation: Submit 100,000+ trade reports daily

• Task 6.4: GDPR Data Protection

  • Implement data subject rights management
  • Add consent management and tracking
  • Create data anonymization and pseudonymization
  • Implement privacy impact assessments
  • Deliverable: GDPR-compliant data protection system
  • Testing: Privacy controls validation
  • Validation: Process data subject requests within regulatory timeframes