Machine learning tools that build and rebalance equity portfolios offer a possible route to bespoke underlyings for structured products.
Artificial intelligence could give structured product issuers another way to build more tailored equity baskets, with portfolio construction and rebalancing handled by machine-learning models rather than fixed selection rules. AutoCIO, developed by Arabesque AI, uses machine-learning forecasts to help construct equity portfolios subject to specified constraints. The platform can build a basket from scratch or analyse an existing portfolio and recommend changes to its holdings and allocations.