Algorithmic trading gone wrong

Much research effort, by academics and practitioners alike, has been devoted to algorithmic trading in recent years, and at least one person I know blames the 2008 crisis for this surge in emphasis. Talking about blame, it appears almost certain that algorithmic trading played an important role in the flash crash of 2010.

But this is by far the most amusing example of algorithmic pricing gone astray: the ask price of a single book reaching millions and millions of dollars on Amazon before anyone noticed.

Princeton visit

I have just ended a 5-day visit to Princeton as part of a bit of road trip through the American Northeast. Even during such a short stay, I could get a feeling for the intensity of the place: apart from my own seminar talk on Minsky and bubbles at ORFE, I attended two good quality talks in the graduate student workshop  at the Bendheim center, followed by Jim Ma's colloquium on BSDEs, then Carl Graham's seminar talk on opinion dynamics and finally a very stimulating talk by Andrew Lo back at Bendheim on the origins of behavior !

If you feel overwhelmed by all the links above, try to imagine being there...

Quantitative Finance Seminars - March edition

As usual on the last Wednesday of the month, we had two talks last week as part of the Quantitative Finance seminar series at Fields. The first talk was by Rafael Mendonza-Arriaga, who spoke about hybrid credit-equity models using time-changed Levy processes, a fruitful topic that attracted a lot of attention in one of the industrial academic forums that we had during the thematic program last year.

The second talk was by Alfred Lehar, who spoke about a general way to allocate capital requirements for systemic risk. His key message is that capital requirements themselves change the risk profile of a bank and its contribution to the overall risk in the system, so that whichever way one uses to measure systemic risk, the final allocation must be a fixed point of an iterative scheme.

Alfred then visited McMaster the next day where he gave a talk at the De Groote School of Business on the uses of market information for bank regulation.

Talking about Minsky moments in the UK

I just returned from a 10-day research visit to Imperial College, where I gave a talk about some preliminary work I have been doing on macroeconomics. While I was there I took a day off to visit Chris Rogers in Cambridge and reconnect with Bill Janeway, who was part of the organization of a memorable conference I attended at the Perimeter Institute a few years ago.

As it turns out, Bill knew Hyman Minsky personally, so I could get an insider view on his unique way of thinking about economic problems.

Seminar Series up and running again

I'm a little late posting this, but after a brief hiatus in December (Christmas) and January (organizers away in Oberwolfach), we re-started the Quantitative Finance Seminar Series again at the Fields Institute with a talk by Mike Ludkovski on February 23rd, who spoke about the optimal time for you to buy an option when your model price differs from the price observed in the market.

Since I arrived earlier at the Institute I could also attend one of the Distinguished Lectures delivered by Yakov Sinai, who was in Toronto for a special workshop celebrating his 75th birthday.

Oberwolfach

During more or less at the same period when the rich and powerful of the world were meeting in Davos this year, I had the privilege to attend another type of select meeting in nearby (for North American standards that is) Oberwolfach, at the ultra prestigious institute known to all mathematicians around the world.


It was my first time there and hopefully not the the last. It goes without saying that the place is ideal for mathematical work and communication between peers. Everything is design to contribute to what they call the "Oberwolfach atmosphere": the isolation from burdens of modern life, great meals, exceedingly good and low cost beer, wine and spirits, no locks at the doors, no internet in your room, a hand written book of abstracts, mid-conference hike towards the place where Black Forest cake was invented, and the list goes on and on.

There were simply too many high caliber talks for me to do justice in a short commentary like this, so I'll restrict myself to sharing a picture which, for me at least, perfectly encapsulates the experience:

Challenge: try to see how many financial mathematicians you can recognize in the official picture for the workshop.

Quantitative Finance article

The article that Tom Hurd and I wrote for Quantitative Finance describing the Fields thematic program appeared in press this month. Somewhere along the editorial process they managed to botch our title (try to spot the error), but I'm still very please with the end result, which can be read here.