Volatility puts algo trading under pressure

Quote from nitro:

You hold an applied mathematics degree from the university of Chicago? This is rather surprising, as the university of Chicago has zero interest in anything "applied" except maybe on the medical side - it prides itself on theory.

But to answer your statement, in my experience, is that the answer is yes and no, simultaneously. The market is generally covariant to coordinates used to describe it's price on your manifold of choice, and therefore one description does not invalidate the other. It is akin to saying, I use a thermometer to tell me it is hot, and you use your skin to tell you it's hot. The temperature is the temperature, but you are using a human instrument and I am using a quantitative one. The temperature is the temperature regardless of instruments used measure it.

Your questions comes down to: what is the tensor (or fibration or some mathematical structure we have not invented yet) that gives the map from the intuition/experience coordinates to quantitative methods coordinates. Both methods ultimately exploit structure. If people knew that map, they would be more than rich - they would have won the Nobel Prize in multiple disciplines because it would unify in a single stroke many mysteries of the human brain.

nitro
More...

your take on chicago is reductivist bullshit, but i like the rest of your answer. i doubt rosy2 will be able to follow it, though.
 
Quote from mingsphinx:

Indeed, if you are so inclined, there are serious philosophical doubts that have been raised about whether it is even possible for something like the mind to arise from inanimate matter for nothing else we see in the physical universe is capable of causation.
More...

interesting. hmm....
 
The problem with your post is that it is based on philosophy and only on philosophy, and hence ultimately says nothing.

Normally I don't go on these excursions on the main forum and leave it to chit-chat, but I will break my rule here just once.

I suggest you tie your mysticism to a more grounded scientific attempt:

http://en.wikipedia.org/wiki/Structuralism

and

http://www.amazon.com/Emperors-New-Mind-Roger-Penrose/dp/0140145346

I am just learning about Structuralism. I came to it by way of mathematics and Alexander Grothendieck,

http://en.wikipedia.org/wiki/Alexander_Grothendieck

perhaps the greatest mathematician of the 20th century and creator of extremely abstract mamthematics. I find it very deep and interesting. The wiki article is very good, but it leaves you wanting more.

Roger Penrose is seen as a quack by brain scientists, but I think he is on a correct path.

nitro
Quote from mingsphinx:

A mathematical definition of structure always implies that certain relationships must hold. Even though we can build in a certain randomness or fuzziness, models being models, are essentially expressions of the associations between variables. The problem is that markets, as one of the most tangible manifestation of the collective human mind, are as prone to sharp reversals as human beings are to changing their minds. We can analogize the mind as a machine, but the analogy will never be perfect and the flaws can lead to serious mistakes. What it boils down to is the free will and consciousness. No machine can replicate what the mind can do. Indeed, if you are so inclined, there are serious philosophical doubts that have been raised about whether it is even possible for something like the mind to arise from inanimate matter for nothing else we see in the physical universe is capable of causation. But algorithms are useful in that large amounts of information can be handily looked at and conclusions reached. The human mind is no match for the computational power of the machine in such instances. Nonetheless, as the machine is unconscious and the intelligence but artificial, the computational strength of the machine must still be guided by the judgment of man who understands mind. To do otherwise invites auto-destruction as the machine is lead by data to commit hara-kiri as lemmings jump off a cliff. And I seriously doubt if there are any luddites amongst us who will not use some kind of machine aided system in their trading/investing pursuits.
More...
 
You guys are getting way too esoteric. You either have a statistically significant entry - or you don't. Depending on how that edge was derived, the edge can, in theory last indefinitely.

It is my belief that all market behavior can be quantified to some degree, it is the money management that allows a trading algorithm to survive during periods of inconsistency.
 
Philosophy and mathematics are the same thing. Both begin with primitive definitions or axioms, and then with the application of a logical field, seek analytical conclusions about what these definitions can mean. Our "dispute" is not about the nature of inquiry, but rather, on the extent to which inquiry can uncover the nature or structure of things. The object of study and contention is the human mind. As much as the rationalists at the University of Chicago would have it, some aspects of human behaivior are simply unpredictable. It is because there is really no way to tell what people will choose that events like elections occur and institutions like financials markets are held to be the best way to figure out value.

Algorithmic trading, when taken to the extreme, violates the fundamental tenet of all markets in that it believes human beings ultimately are predictable. Left entirely on its own, serious mistakes can occur where the application of some human common sense or perhaps even intuition and insight could easily have forestalled.

But computer models can be very useful. Who would trade options without a model these days? Everyone of us in the market is the proverbial blind man trying to figure out what the elephant is. By using computers, we can often see more even though we may not see all. And the added vision can be a crucial advantage.

Do not get me wrong, I am not suggesting that computers are not relevant to decision making. But as the code is written by man, and there can be no doubt that all men are fallible, even if there are no errors in the data, the complex algorithmns can virtually be guaranteed not to work the way its makers thought it would. Add to this the incompleteness of any code, for we are constantly learning and the market ever evolving, and the need for human intervention becomes even greater today than before.

The machine has never replaced man. What it does is make man far more productive than he otherwise would be. We can expect fewer and fewer traders in the employ of hedge funds and investment banks, but there can be no doubt that there will always be traders.

Quote from nitro:

The problem with your post is that it is based on philosophy and only on philosophy, and hence ultimately says nothing.

Normally I don't go on these excursions on the main forum and leave it to chit-chat, but I will break my rule here just once.

I suggest you tie your mysticism to a more grounded scientific attempt:

http://en.wikipedia.org/wiki/Structuralism

and

http://www.amazon.com/Emperors-New-Mind-Roger-Penrose/dp/0140145346

I am just learning about Structuralism. I came to it by way of mathematics and Alexander Grothendieck,

http://en.wikipedia.org/wiki/Alexander_Grothendieck

perhaps the greatest mathematician of the 20th century and creator of extremely abstract mamthematics. I find it very deep and interesting. The wiki article is very good, but it leaves you wanting more.

Roger Penrose is seen as a quack by brain scientists, but I think he is on a correct path.

nitro
More...
 
Quote from ASusilovic:

I went through the content of the book and it has some pretty funny chapters. To name a few :

Is there a role for quantum mechanics in brain activity ?

Where is the seat of consciousness ?

The time delay of consciousness
More...

Quote from mingsphinx:

Philosophy and mathematics are the same thing. Both begin with primitive definitions or axioms, and then with the application of a logical field, seek analytical conclusions about what these definitions can mean. Our "dispute" is not about the nature of inquiry, but rather, on the extent to which inquiry can uncover the nature or structure of things. The object of study and contention is the human mind. As much as the rationalists at the University of Chicago would have it, some aspects of human behaivior are simply unpredictable. It is because there is really no way to tell what people will choose that events like elections occur and institutions like financials markets are held to be the best way to figure out value.

Algorithmic trading, when taken to the extreme, violates the fundamental tenet of all markets in that it believes human beings ultimately are predictable. Left entirely on its own, serious mistakes can occur where the application of some human common sense or perhaps even intuition and insight could easily have forestalled.

But computer models can be very useful. Who would trade options without a model these days? Everyone of us in the market is the proverbial blind man trying to figure out what the elephant is. By using computers, we can often see more even though we may not see all. And the added vision can be a crucial advantage.

Do not get me wrong, I am not suggesting that computers are not relevant to decision making. But as the code is written by man, and there can be no doubt that all men are fallible, even if there are no errors in the data, the complex algorithmns can virtually be guaranteed not to work the way its makers thought it would. Add to this the incompleteness of any code, for we are constantly learning and the market ever evolving, and the need for human intervention becomes even greater today than before.

The machine has never replaced man. What it does is make man far more productive than he otherwise would be. We can expect fewer and fewer traders in the employ of hedge funds and investment banks, but there can be no doubt that there will always be traders.
More...

I have no idea how this stuff ended up in this thread, but I will post it here just for kicks.

"Quantum Water" Discovered in Carbon Nanotubes
A new quantum state of water found in carbon nanotubes at room temperature could have important implications for life"

http://www.technologyreview.com/blog/arxiv/26319/?ref=rss

Who's laughing now? Penrose must be ecstatic.
 
You must log in or register to reply here.
Back
Top