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May 4th, 2007 by eyal | Filed under Day Trading, Techie. |
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HAL 9000-Style Machines, Kubrick’s Fantasy, Outwit Traders
In his cubicle overlooking the trading floor, Kearns, 44, consults with Lehman Brothers traders as Ph.D.s tap away at secret software. The programs they’re writing are designed to sift through billions of trades and spot subtle patterns in world markets. Kearns, a computer scientist who has a doctorate from Harvard University, says the code is part of a dream he’s been chasing for more than two decades: to imbue computers with artificial intelligence, or AI.
Well, let’s hope it takes them another couple of decades ;-) And it gets better:
Uptown, at Columbia University, computer science professor Kathleen McKeown says she imagines building an electronic Warren Buffett that would be able to answer just about any kind of investing question.“We want to be able to ask a computer, `Tell me about the merger of corporation A and corporation B,’ or `Tell me about the impact on the markets of sending more troops to Iraq,”’ McKeown, 52, says.
However the promise of AI has always been much greater than the actual delivery.
Take chess. Deep Blue, a chess-playing supercomputer developed by International Business Machines Corp., defeated world champion Garry Kasparov in 1997. The rules of chess never change, however. Players have one goal: to capture the opponent’s king. There are only so many moves a player can make, and Deep Blue could evaluate 200 million such positions a second.
Financial markets, on the other hand, can be influenced by just about anything, from skirmishes in the Middle East to hurricanes in the Gulf of Mexico. In computerspeak, chess is a closed system and the market is an open one.
“AI is very effective when there’s a specific solution,” Hamilton says. “The real challenge is where judgment is required, and that’s where AI has largely failed.”
Phew..
Anyways, interesting read. See the full, fairly long, article for more on this.
cool, thanks for the link
You’re welcome. I thought you might find it interesting :-)
[...] Supercomputers aren’t going to get any slower. Actually it seems like they will continue to speed up exponentially - that’s the trend anyway, why would it stop now? This means that in the next ten years, the growth will be even greater than the last ten. Think about what’s happened in the last ten years. Not many people even had cell phones in 1997. The internet was just being born. Think how much just ten years has changed Wall Street. There’s no way I could trade like I do now ten years ago. What will the next ten years do to trading and the stock market? This article talks about a possibility that I think is most likely (via tradereyal): This is going to change the world, and it’s going to change Wall Street Like every move a player makes in a game of chess, every trade changes the potential outcome, Kearns says. Machine-learning algorithms are designed to examine possible scenarios at every point along the way, from beginning to middle to end, and figure out the best choice at each moment. “And that is where Wall Street is going,’’ he says. Human traders will still provide insights into the markets, he says; more and more, however, those insights will be based on data rather than intuition. He calls his program Deep Green. The name recalls IBM’s Deep Blue — and money. DeepGreen evaluates market data, learns from it and scores trading strategies for stocks, options and other investments, he says. “This doesn’t get rid of the rule of human creativity; it actually makes it more important,’’ he says. “You have to be in tune with the market and be able to say, ‘I’m smelling something here that’s worth learning about.”’ [...]