Two Vignettes in Computational Finance
Speaker: Mike Kearns , U PennContact:
Date: November 2 2010
Time: 4:15PM to 5:15PM
Host: Scott Aaronson, CSAIL, MIT
Be Blackburn , 3-6098, firstname.lastname@example.orgRelevant URL:
I will discuss two results in quantitative finance in which
algorithmic arguments play a central role.
In the first part, I will introduce the problem of order dispersion in
dark pools, a relatively new kind of equities exchange in which
traders seek to "invisibly" trade large volumes at market prices. I
will present a provably efficient algorithm for near-optimal order
placement in dark pools. This algorithm is based on methods from
reinforcement learning and the Kaplan-Meier estimator from survival
In the second part, I will compare two different models for the
arriving limit order prices in the standard continuous double auction
mechanism of electronic trading. In one model, traders are seen as
having "fundamental" views on price, while in the other they form
prices only relative to those of other traders. I will quantify a
sense in which the former model has highly stable dynamics and the
latter has highly unstable dynamics, and discuss some implications for
the ongoing debate over high frequency trading.
The talk will be self-contained, and the theoretical results
illustrated by experiments on trading data.
Joint work with Kuzman Ganchev, Yuriy Nevmyvaka, and Jennifer Wortman
Vaughan (dark pools); and with Eyal Even-Dar, Sham Kakade, and Yishay
Mansour (dynamic instability).
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