Fwd: [CS] ACM Talk Friday, Jan 12th: Evolutionary Software Design for the O ptions Market: Towards Fully Autonomous Trading Agents

[Karin Lustre]

>From: Benjamin Blair <bblair at peak6.com>
>To: "'cs at cs.uchicago.edu'" <cs at cs.uchicago.edu>
>Subject: [CS] ACM Talk Friday, Jan 12th: Evolutionary Software 
>Design for the O
>  ptions Market: Towards Fully Autonomous Trading Agents
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>Date: Tue, 9 Jan 2001 14:28:41 -0600
>
>Speaker: Ben Blair (BS '00, Senior Programmer PEAK6 Capital Management)
>Time: Friday, Jan. 12th at 3PM
>Location: Ryerson Room 276
>Topic: Evolutionary Software Design for the Options Market: Towards Fully
>Autonomous Trading Agents
>
>An option is a contract that provides the holder of the option with the
>right to buy or sell an underlying commodity at a specified price on or
>before a specified date. Options, then, have a fairly well defined price,
>based on the current price of the underlyer, the time until the option
>expires, and the volatility in the price of the underlyer.  Compare this to
>the price of a stock, which can be based on factors as indeterminate as the
>perceived mood of the Fed or the current weather. Since nearly all the
>information required to determine the price of an option is well defined and
>readily available, it is possible to design software systems that can watch
>the market and make decisions about which options are mis-priced and
>therefore should be traded. Present inefficiencies in the market allow the
>development of software that is significantly less than perfect at valuing
>options, yet, with some human oversight, is extremely successful at finding
>lucrative trades. These revenues can then be re-invested to further improve
>the software. As such software systems are deployed, their actions change
>the market, in most cases making the market more efficient and forcing the
>software systems to be further improved. This feedback will become ever more
>pronounced as competing software systems begin to react to each other's
>actions in the market. We believe that intelligent agents that are not
>designed through interaction and co-evolution with a live data environment
>such as the options market are not likely to succeed. We currently have
>autonomous hedging systems that average around $20MM in trades each day.
>There are a number of significant challenges that must be overcome before
>software can be allowed to trade completely autonomously, but we are
>confident we will be one of the first to achieve this goal. We believe that
>with our current approach, we can have fully autonomous trading agents
>trading on electronic exchanges in 2 - 5 years. The techniques developed
>during this process should be widely applicable to other intelligent agent
>applications.
>
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