Introduction Shift in QF αF Algorithm Data and AI Assessment

Introduction

Christopher Ting

http://cting.x10host.com/CUHKSZ/CUHKSZ.html

http://www.mysmu.edu/faculty/christophert/k: christophert@smu.edu.sg

June 25, 2018

Christopher Ting Topic 1 June 25, 2018 1/13

Introduction Shift in QF αF Algorithm Data and AI Assessment

Broad Lesson Plan

1 Introduction

2 Shift in QF

3 αF

4 Algorithm

5 Data and AI

6 Assessment

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Introduction Shift in QF αF Algorithm Data and AI Assessment

Shift in QF

Z Risk-neutral pricing and hedging (structuring) have matured.

Z High-frequency algo trading (dynamics of limit-order book)

Z Quantitative investment & trading

Z Quantitative risk management (XVA, multi-curve approach)

Z Machine learning, AIReading: AI Adoption Across Capital Market (May 2018)

Reading: Goldman Sachs Equity Research (November 14, 2016)

Statistics is the study of algorithms for data analysis.Rudolf Beran

Z Research Scientists at Renaissance TechnologiesUse machine-learning, applied mathematics, and techniques frommodern statistics to develop and refine models of the financialmarkets and to develop trading algorithms based on thosemodels.

Christopher Ting Topic 1 June 25, 2018 3/13

Introduction Shift in QF αF Algorithm Data and AI Assessment

αlgorithmicF inance

practical

algorithms

data

Python, R

prototypingStatistical

mmmtamingrisks

theoretical,mathematical

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Introduction Shift in QF αF Algorithm Data and AI Assessment

What is an Algorithm?

Z Merriam-Webstera set of steps that are followed in order to solve a mathematicalproblem or to complete a computer process

Z Cambridgea set of mathematical instructions or rules that, especially if given to acomputer, will help to calculate an answer to a problem

Z Oxforda set of rules that must be followed when solving a particular problem

Z Longmana set of instructions that are followed in a fixed order and used forsolving a mathematical problem, making a computer program etc

Z WordWeb Onlineprecise rule (or set of rules) specifying how to solve some problem

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Introduction Shift in QF αF Algorithm Data and AI Assessment

Origin of Algorithm

Z Algorithm (Algoritmi) is a Latinisation of al-Khwarizmi (c. 780–c.850).

Z He was a Persian (modern Khiva, Uzbekistan) mathematician,astronomer, and geographer.

Z He invented two algorithmic operations: al-jabr (completion) andal-muqabala (balancing).

Source: http://jeff560.tripod.com/stamps.html

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Introduction Shift in QF αF Algorithm Data and AI Assessment

Al-Khwarizm’s Solution of x2 + 10x = 39

Step 1 Step 2 Step 3x× x x2 + 10x Completion of Square

x2 x2

52 × x

52 × x

52 × x

52 × x 39

254

254

254

254

The completed square’s area is 4× 25/4 + 39 = 64. Each side of thesquare is therefore 8. But each side is of length 5/2 + x+ 5/2 sox+ 5 = 8, giving x = 3 as a solution.

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Introduction Shift in QF αF Algorithm Data and AI Assessment

Algorithms for Data Analysis

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Introduction Shift in QF αF Algorithm Data and AI Assessment

Machine Learning with Python

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Introduction Shift in QF αF Algorithm Data and AI Assessment

Black-Box Algorithm

...

......

I1

I2

I3

In

H1

Hn

O1

On

Inputlayer

Hiddenlayer

Ouputlayer

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Introduction Shift in QF αF Algorithm Data and AI Assessment

New Developments

αlgorithmicF inance

FinancialMarkets

BayesianData

Analysis

StateSpace

Analysis

DeepLearning

FinancialTechnologies

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Introduction Shift in QF αF Algorithm Data and AI Assessment

Assessment

\ Class Activity: 10%F Ask questions enthusiastically.F Respond to questions with insightful comments.F Class handout

\ Mini-Project: 15%� Presentation on Session 14 (5%)� Project Report (10%)

\ Homework Assignments: 15%

\ Mid-Term Test in Class: 15%

\ Final Exam: 45%

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Introduction Shift in QF αF Algorithm Data and AI Assessment

Grace versus Grade

Learningto learn

Grow

Research

Apply

Communicate

Enjoy

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