Question:

“Please develop from the elements of this session how new programming technologies are
going to alter the financial service industry.
Explain in particular how the neuron networks will reshape the economic landscape with
arguments using the CLT, the information entropy, the case of Amazon and the integral
transforms.”

Answer:
Introduction:
Data is now at the center of all concerns, we are in an era where the BIG DATA can
dictate the success or loss of a company. As seen during this course, AMAZON which in the
early 2000s was close to bankruptcy has managed today to rank among the GAFA. This was
made possible by an innovative business model that pushed them to invest in data to offer more
and more products. Amazon is therefore today unavoidable. But Amazon is not an isolated case,
in fact all GAFA currently have a business model based on BIG DATA. And in a way, to be
able to see the impact of the BIG DATA, you just have to see the place of GAFA in our current
economy. "Data is worth gold"

Benefits of BIG DATA:

BIG DATA is therefore in the center of many economic issues and modification of the
financial service industry. It’s a simple concept: increase the volume of data at high speed. But
behind it are many aspects observable via the 5 "V". 3 of them are easily to found:

1. Volume: Logically, the amount of data is large. Moreover, this data is unstructured and
low density. It is therefore essential to recover a large quantity of data, but also to
reprocess it so that it can be used.
2. Velocity: This corresponds to the speed at which data is received and processed. This
type of data is often sent directly to memory rather than to disk to save execution time.
This is one of the reasons why processors and memory have become so important in
today's high performance PCs. Before, powerful processors were often synonymous
with processors for gaming, but today more than ever they are at the center of the BIG
3. Variety: The variety refers to the many types of data available. Historically, this data
was often structured but with BIG DATA this is no longer necessarily the case, as it is
much easier to access the data quickly.
More recently 2 other V's have appeared:
1. Value: With the BIG DATA, the volume of data is much larger, so the answers can be
more complete and precise. Moreover, their verification is simpler because it is enough
to confront them with others. Nevertheless, not everything is perfect and it is easy to
come across false information even today.
2. Veracity: Finally, more complete responses mean greater confidence in the data, which
means a completely different approach to problem solving

BIG DATA and MATHS:

 As we have seen, with the progressive arrival of BIG DATA and also BLOCKCHAIN
it is becoming easier and easier to manage a large amount of data. But as seen in the
securitization courses, the mathematical models are more and more accurate as the amount of
data increases, and this is exactly what the TCL says. So in reality, the more data you have, the
more accurate the models used become. Nevertheless, these models omit the tail risk because
we are on a normal law and therefore always have a share of randomness.
Moreover, having a large number of data allows us to choose which model is the most adequate
in our case. In other words: which model will most accurately show the reality? The principle
behind this idea is more or less the same as in informational entropy. This is the fact that the
particles of a system will try to explore all possible states of energy and occupy a maximum of
energy space. Information is perceived as a gas with several numbers that are gathered in an
organized group of subsets with different levels of importance. The calibration of Artificial
Intelligence and neural networks is based on maximizing the information entropy in order to
make "predictions" from the data.
However, discrepancies with reality may appear. Although we choose a suitable model, it may
not correspond to reality. This is a phenomenon known in particular in machine learning, which
is in this case called the “cost function”. It is this function that we try to minimize to have the
most accurate model possible. In BIG DATA there is the same principle and to understand the
discrepancies with reality we use the integral transforms. For that, it is necessary to use the
Taylor Young principle via the Liouville Remman formula to set up an integral transformation
and approximate a direct distribution to be able to model divergences in reality.

With these arguments, it is easy to think that the BIG DATA and the mathematics which results
from it will modify the actual service industry. And, we can notably see it with the AMAZON
case which is a perfect example of the use of BIG DATA

BIG DATA at the service of amazon:

AMAZON is a perfect example of a business based on the use of BIG DATA. As seen in the
introduction, AMAZON was on the verge of bankruptcy before changing its business plan and
reinvesting his cash to increase the quantity of products available. In fact, AMAZON adopted
a strategy without dividends, without debt, just to reinvest a maximum in the quantity of
products available to attract new customers. The BIG DATA has therefore allowed AMAZON
to become one of the largest companies in the world today.

In fact, BIG DATA allowed amazon to:

• Better understand market conditions, trends and needs, as well as study competitors by
analyzing the data.
• Increase customer satisfaction: By analyzing the data, AMAZON was able to know the
preferences as well as the personal data about their existing customers as well as their
potential customers. Thanks to this, they were able to evolve accordingly and focus on
key points.
• Increase sales: Subsequently, knowing both consumer demands and market conditions
allowed AMAZON to boost its sales. Today, almost any product you are looking for on
the internet exists on AMAZON!
• Optimize costs: By analyzing the data collected from customer databases, services and
online resources, AMAZON can propose the most appropriate price that will allow it to
both make a profit and be the most attractive on the market.
And this case shows how much, well used, big data can change things!

Conclusion:
In conclusion, the non-negligible benefits of BIG DATA coupled with all that it brings from an
economic point of view but also mathematically via the use of more and more precise models,
will be the key for a change in the current financial system.