Creating a Market-Leading Consumer Price Index Projection

How ModelOp supports trading decisions at a large US-based broker-dealer

Business Case

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Since CPI can also be used as an indicator for periods of inflation or deflation, an accurate projection of CPI can provide a trading advantage ahead of market shifts.

However, vendor-available CPI projections have reduced trading differentiation. In-house solutions that can provide more granular market basket projections are needed to provide market advantage.

Model Deployed in Business

ModelOp created a CPI projection model that consistently ranks highly in the Bloomberg consensus vendor list. It provides advanced analysis at the category level to better identify pricing projections of specific goods; influencing better informed trading decisions.

The data acquisition, execution, and data publication of this model is automated; providing a seamless experience for the trader through a web dashboard (R Shiny).

Project Specifications:

This ModelOp customer has been built as a cloud-native company, leveraging the Amazon Web Services platform for their core business functions. ModelOp used standard data storage and data access technologies from AWS and extended with custom visualization tools for user interaction.

Model Technique(s)

ARIMA

Model Language

R

Model Visualizer

R Shiny

Key Data Sources

Bureau of Labor Statistics (BLS), Federal Reserve Economic Data (FRED)

For Businesses, Not Scientists

Our model not only helps to better inform trading decisions but also provides an extensible analytics product that can be improved and augmented. As the customer defines better ways in which to predict consumer goods pricing, they have a well defined framework to extend the original model and immediately push to the trading team in an interpretable format.

Explore the Impact of ModelOps

We have the experience and solution to help you harness the power of AI/ML at scale that will boost your core processes. Let’s create a unique solution together.

Contact Brooke for more information