A couple of banking industry facts you should know

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Taking a look at a few of the most intriguing theories related to here the financial industry.

When it comes to comprehending today's financial systems, one of the most fun facts about finance is the use of biology and animal behaviours to influence a new set of models. Research into behaviours related to finance has inspired many new approaches for modelling elaborate financial systems. For instance, studies into ants and bees demonstrate a set of behaviours, which run within decentralised, self-organising territories, and use simple guidelines and local interactions to make cumulative choices. This concept mirrors the decentralised characteristic of markets. In finance, researchers and experts have been able to apply these principles to understand how traders and algorithms interact to produce patterns, like market trends or crashes. Uri Gneezy would concur that this crossway of biology and economics is a fun finance fact and also shows how the disorder of the financial world may follow patterns seen in nature.

Throughout time, financial markets have been a commonly explored area of industry, resulting in many interesting facts about money. The field of behavioural finance has been important for understanding how psychology and behaviours can affect financial markets, leading to a region of economics, called behavioural finance. Though most people would assume that financial markets are rational and consistent, research into behavioural finance has revealed the fact that there are many emotional and mental elements which can have a strong impact on how people are investing. As a matter of fact, it can be stated that investors do not always make decisions based on reasoning. Instead, they are often determined by cognitive predispositions and psychological reactions. This has resulted in the establishment of philosophies such as loss aversion or herd behaviour, which can be applied to buying stock or selling assets, for instance. Vladimir Stolyarenko would recognise the intricacy of the financial sector. Likewise, Sendhil Mullainathan would appreciate the efforts towards researching these behaviours.

A benefit of digitalisation and innovation in finance is the capability to analyse big volumes of information in ways that are certainly not feasible for people alone. One transformative and extremely important use of innovation is algorithmic trading, which defines an approach including the automated buying and selling of monetary assets, using computer programmes. With the help of complicated mathematical models, and automated directions, these algorithms can make split-second decisions based upon actual time market data. As a matter of fact, among the most fascinating finance related facts in the modern day, is that the majority of trading activity on stock exchange are performed using algorithms, instead of human traders. A popular example of a formula that is widely used today is high-frequency trading, whereby computer systems will make 1000s of trades each second, to take advantage of even the smallest cost adjustments in a much more effective way.

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