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Financial signal processing is a branch of
signal processing Signal processing is an electrical engineering subfield that focuses on analyzing, modifying and synthesizing '' signals'', such as sound, images, and scientific measurements. Signal processing techniques are used to optimize transmissions, ...
technologies which applies to signals within
financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial markets ...
. They are often used by quantitative analysts to make best estimation of the movement of
financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial markets ...
, such as
stock In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a company ...
prices,
option Option or Options may refer to: Computing *Option key, a key on Apple computer keyboards *Option type, a polymorphic data type in programming languages *Command-line option, an optional parameter to a command *OPTIONS, an HTTP request method ...
s prices, or other types of
derivative In mathematics, the derivative of a function of a real variable measures the sensitivity to change of the function value (output value) with respect to a change in its argument (input value). Derivatives are a fundamental tool of calculus. ...
s.


History

The modern start of financial signal processing is often credited to
Claude Shannon Claude Elwood Shannon (April 30, 1916 – February 24, 2001) was an American mathematician, electrical engineer, and cryptographer known as a "father of information theory". As a 21-year-old master's degree student at the Massachusetts In ...
. Shannon was the inventor of modern communication theory. He discovered the capacity of a communication channel by analyzing
entropy Entropy is a scientific concept, as well as a measurable physical property, that is most commonly associated with a state of disorder, randomness, or uncertainty. The term and the concept are used in diverse fields, from classical thermodyna ...
of information. For a long time, financial signal processing technologies have been used by different
hedge funds A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as ...
, 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 and by T.M. Cover, J.A. Thomas. A.N. Akansu and M.U. Torun published the book in financial signal processing entitled ''A Primer for Financial Engineering: Financial Signal Processing and Electronic Trading''. An edited volume on the subject with the title ''Financial Signal Processing and Machine Learning'' was also published. The first IEEE
International Conference on Acoustics, Speech, and Signal Processing ICASSP, the International Conference on Acoustics, Speech, and Signal Processing, is an annual flagship conference organized of IEEE Signal Processing Society. All papers included in its proceedings have been indexed by Ei Compendex. The first ICAS ...
session on Financial Signal Processing was organized at ICASSP 2011 in Prague, Czech Republic. There were two special issues of IEEE Journal of Selected Topics in Signal Processing published on Signal Processing Methods in Finance and Electronic Trading in 2012, and on Financial Signal Processing and Machine Learning for Electronic Trading in 2016 in addition to the special section on Signal Processing for Financial Applications in IEEE Signal Processing Magazine appeared in 2011.


Financial Signal Processing in Academia

Recently, a new research group in
Imperial College London Imperial College London (legally Imperial College of Science, Technology and Medicine) is a public research university in London, United Kingdom. Its history began with Prince Albert, consort of Queen Victoria, who developed his vision for a ...
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, led by
Anthony G. Constantinides Anthony George Constantinides FREng FIET (born 1943) is a professor of signal processing and the founder of the Communications and Signal Processing Group of the Department of Electrical and Electronic Engineering in Imperial College London. He ha ...
. In June 2014, the group started a collaboration with the
Schroders Schroders plc is a British multinational asset management company, founded in 1804. The company employs over 5,000 people worldwide in 32 locations around Europe, America, Asia, Africa and the Middle East. Headquartered in the City of London, it ...
Multi-Asset Investments and Portfolio Solutions (MAPS) team on multi-asset study. Other research groups working on the financial signal processing include the Convex Research Group of Prof. Daniel Palomar and the Signal Processing and Computational Biology Group led by Prof. Matthew R. McKay at
the Hong Kong University of Science and Technology The Hong Kong University of Science and Technology (HKUST) is a public research university in Clear Water Bay Peninsula, New Territories, Hong Kong. Founded in 1991 by the British Hong Kong Government, it was the territory's third institution ...
and Stanford University Convex Optimization Group led by Prof.
Stephen Boyd Stephen Boyd (born William Millar; 4 July 1931 – 2 June 1977) was a Northern Irish actor. He appeared in some 60 films, most notably as the villainous Messala in ''Ben-Hur'' (1959), a role that earned him the Golden Globe Award for Be ...
at the Stanford University. There are also open source libraries available for index tracking and portfolio optimization.


Financial Signal Processing in Industry

* Vivienne Investissement: multifractality for asset price, covariance estimation for asset allocation; * NM FinTech; * Sanostro: On the back of a lack of market place for signals, Sanostro AG, headquartered in Switzerland, created the first B2B signal market place providing signals on all liquid assets. Sanostro allows signal providers (hedge funds, quant teams of institutional investors, etc.) to provide their signals, standardize them, so that their track record can be audited. The signals themselves can then be re-combined for B2B purposes, like dynamic FX hedging, tactical asset allocation, equity upside capture;


See also

*
Financial engineering Financial engineering is a multidisciplinary field involving financial theory, methods of engineering, tools of mathematics and the practice of programming. It has also been defined as the application of technical methods, especially from mathe ...


References

{{Reflist Signal processing Financial markets