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Financial signal processing

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Financial signal processing

Financial signal processing is a branch of signal processing technologies which applies to financial signals. They are often used by quantitative investors to make best estimation of the movement of equity prices, such as stock prices, options prices, or other types of derivatives.

History

The early history of financial signal processing can be traced back to Isaac Newton. Newton lost money in the famous South Sea Company investment bubble.

The modern start of financial signal processing is often credited to Claude Shannon. Shannon was the inventor of modern communication theory. He discovered the capacity of a communication channel by analyzing entropy of information.[1]

For a long time, financial signal processing technologies have been used by different hedge funds, such as Jim Simon's Renaissance Technologies. However, hedge funds usually do not reveal their trade secrets. Some early research results in this area are summarized by R. H. Tütüncü and M. Koenig[2] and by Thomas M. Cover, Joy A. Thomas.[3] In 2011, IEEE Signal Processing Society called for a Special Issue on Signal Processing Methods in Finance and Electronic Trading.[4]

Imperial College London Financial Signal Processing Laboratory

Recently, a new research group in Imperial College London has been formed which focuses on Financial Signal Processing as part of the Communication and Signal Processing Group of the Electrical and Electronic Engineering department.[5] The group is led by the renowned Professor of Signal Processing, Anthony G. Constantinides. In June 2014 the group started a collaboration with the Schroders Multi-Asset Investments and Portfolio Solutions (MAPS) team on multi-asset study.[6]

References

  1. ^ "Connections Between Financial Signal Processing, Entropy, and Superior Investment Returns, James Simon, Jim Simon, Renaissance Technologies". Fisig.com. Retrieved 2013-06-16. 
  2. ^ R. H. Tütüncü and M. Koenig, "Robust asset allocation", Annals of Operations Research, vol. 132, pp. 157–187, 2004
  3. ^ Thomas M. Cover, Joy A. Thomas, Elements of Information Theory, 2nd Edition, Wiley, 2006
  4. ^ http://www.signalprocessingsociety.org/uploads/special_issues_deadlines/sp_finance.pdf
  5. ^ "Financial Signal Processing Lab". Retrieved 2014-02-17. 
  6. ^ "Schroders Press Release". Retrieved 2014-07-15. 


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