Unlocking Competitive Advantage with Synthetic Data Services

Sam Naji, Joseph Tekriti
Data Science
March 30, 2023
3 minute read
Table of Contents

The Uncharted Waters of Commodity Markets

The commodity market is a significant component of the financial and derivative markets. The commodity market trades soft commodities like cattle, corn, and tea to hard commodities like natural gas, oil, silver, and fertilizers. Billions of dollars are traded per day on the commodity market. Like any other market, a legal informational and technical advantage allows individuals or institutions to increase their trading profits. Specifically, in the evolving world of commodity trading, access to high-quality data plays a significant role in gaining a competitive advantage.  

The Power of AI in Synthetic Data Generation:

Traditional trading firms might rely on historical and real-time data to analyze market trends, identify patterns and predict price movements. However, the application of AI and its ability to generate synthetic data has massive upside potential in finance. This article aims to explain the promising applications of AI-generated synthetic data in commodity trading, spotlighting its benefits as a service.

Understanding AI-Generated Synthetic Data

Firstly, it is important to understand AI-generated synthetic data. Simply put, AI-generated synthetic data is the application of machine learning algorithms specifically to create artificial datasets that are similar to real-world data. This method is done by training AI models on existing data patterns based on similar statistical patterns as the original data. This results in the artificial dataset having similar properties to the original datasets. The use of synthetic data needs to be more stated. It can be used as a substitution for real data, allowing small firms to access and experiment with real-world applications of their products. For commodity trading, it provides traders and managers with additional insights and improved risk management through enhanced decision-making qualities.  

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Applications and their benefit

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  1. Augmenting Data Availability: The first benefit is the massive increase in the availability of data. As someone who used to trade commodities, It is noticed that commodity markets, specifically illiquid commodities (the state of a stock, bond, or other assets that cannot easily and readily be sold or exchanged for cash without a substantial loss in value), need more data. Take palladium, for example. Due to its illiquid state, it needs more statistical and financial information. This substantially decreases the ability to accurately price-in risk assessment and expected valuations. However, AI-generated synthetic data can fill in this need for more data by simulating market scenarios by generating vast amounts of data. This allows traders to access a broader range of information with greater accuracy.
  2. Fortifying Risk Management through Scenario Analyses: This follows by creating conditions of risk management and its scenario analyses. Synthetic data allows traders to conduct improved risk assessments and scenario analyses without risking capital. Moreover, this allows for formulating accurate assessments through the increased sample size (data points). Apart from creating mathematical risk assessments, such as measuring implied volatility and value at risk models, traders can also evaluate the potential of supply disruptions, geopolitical tensions, and policy changes. These are much harder events to model mathematically. All this allows traders to make more informed decisions and develop enhanced trading strategies.  
  3. Accelerating Algorithm Development and Testing: There is also the application of algorithm development and its testing benefits. AI-created synthetic data allows for improved algorithm development and testing. Trades can utilize such synthetic datasets to train their trading algorithms to enhance their profitability accuracy. Doing so reduces the expected loss of capital using the same strategies in real-life markets. It is always better to test your trading strategies on various market conditions and not worry about losses.  
  4. Upholding Privacy and Encouraging Collaboration: Lastly, privacy protection is possible. This can allow for enhanced training and, or collaboration which results in more data within the traded commodity. Such data can also be exported or can be used to educate traders, analysts and managers in your firm.  
  5. The Competitive Edge of AI-Backed Synthetic Trading: Synthetic data in comedy trading can also address aspects of privacy protection. Specifically, gathering financial data may be limited or blocked due to confidentiality concerns or privacy regulations imposed by firms or trading commissions. Synthetic data allows traders to bypass this by providing alternative datasets which share equal statistical and pattern characteristics. Furthermore, this application of synthetic data can be exported or shared with the firm and stakeholders, allowing for collaboration and joint research efforts across different groups. For example, imagine there is a commodity trading firm that wants to collaborate with researchers to find optimal pattern strategies. However, due to privacy concerns, the researchers are forbidden to share real trading data directly with the trading firm. Here, synthetic data would become a valuable resource in which they can generate data with similar statistical properties and patterns to their actual trading data.  


Overall the above-mentioned are a few direct advantages AI-backed synthetic trading would bring. From increased data availability, improved risk management and testing, as well as improved privacy protection and data exportation, a trading firm would gain a technical advantage over other firms with our synthetic data services.

In summary, our Epochs-Gen synthetic data services offer a plethora of advantages that could revolutionize your approach to commodity trading. From providing a rich data environment to enabling advanced risk management, testing, and privacy protection mechanisms, we empower your firm with the tools it needs to excel in the complex world of commodity trading. Choose Epochs-Gen, and bring the future of commodity trading to your firm today.

Acknowledgment: This article was skillfully crafted with the help of Ansai R.

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