CISE Seminar: March 1, 2019 – Bob Barmish, Boston University
BU Photonics Building
8 St. Mary’s Street, PHO 211
3:00pm-4:00pm
Bob Barmish
Boston University
On Use of the Expected Logarithmic Growth Criterion: From Gambling to Stock Trading
In the mid-1950s, John Kelly and Claude Shannon at Bell Labs developed the Expected Logarithmic Growth Criterion to study gambling. This criterion, further pursued by others such as Cover and Thorp, is a prescription for optimal betting when faced with a sequence of gambles which are modelled in terms of independent and identically distributed random variables. With this criterion serving as the takeoff point, in this seminar, I will provide an overview of my collaborative research concentrating on this system of betting and on issues which arise when taking these ideas into the world of stock trading. In this regard, perhaps the most important point to note is that in the gambling literature on this topic, it is typically the case that a perfect model is assumed for the sequence of random variables X(k) representing the returns on the bets. However, in financial markets, such an assumption is of questionable use. Said another way, in potentially volatile markets, the stochastic process for stock returns is not easily modelled. Given that this process is often highly non-stationary, a model may be of limited use in the prediction of future prices. In addition to concentration on these issues, this talk will also include attention paid to practical considerations which arise when making a transition from theory to practice. This includes backtesting with historical data, transaction costs, leverage and margin.
In early 2019, B. Ross Barmish joined Boston University as Research Professor in the Department of Electrical and Computer Engineering. Prior to joining BU, he held faculty positions in engineering at the University of Wisconsin, the University of Rochester and Yale University. From 2001-2003, he served as Chair of the EECS Department at Case Western Reserve while holding the Nord Endowed Professorship. He received his Bachelor’s degree in EE from McGill University and the M.S. and Ph.D. degrees, also in EE, from Cornell University.
Throughout his career, he has served the IEEE Control Systems Society in many capacities and has been a consultant for a number of companies. Professor Barmish is the author of the textbook “New Tools for Robustness of Linear Systems” and is a Fellow of both the IEEE and IFAC for his contributions to robust control. He received two Best Journal Publication awards, each covering a three-year period, from the International Federation of Automatic Control and has given a many keynotes and plenary lectures at major conferences. In 2013, he received the IEEE Control Systems Society Bode Prize.
While his earlier work concentrated on robustness of dynamical systems, his current university research involves building a bridge between feedback control theory and trading in complex financial markets. In addition to this academic pursuit, in his capacity as CEO of Robust Trading Solutions, his work involves transition of stock-trading algorithms from theory to practice and government sponsored research on the NASDAQ Limit Order Book.
Faculty Host: Sean Andersson
Student Host: Arian Houshmand