ACC 2012 tutorial session: An introduction to hedged-like stock trading from a control theoretic point of view

摘要

The topics in this tutorial relate to a new line of research involving the use of control-theoretic tools in stock trading. No significant knowledge of stock trading will be assumed. Our goal is to demonstrate how feedback-based methods can be used to protect an individual stock or portfolio using trading algorithms and diversification concepts. A major theme of the session will be to contrast the predictive models and associated methods of classical finance with new reactive approaches that emphasize the attractive properties of feedback control. In this vein, classical predictive theory including Markowitz portfolio optimization, Merton's model and pairs trading will be presented alongside the newer feedback-centered paradigm that utilizes concepts such as idealized market models, Simultaneous Long-Short (SLS) strategies and market neutralization.