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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 audio signal processing, sound, image processing, images, Scalar potential, potential fields, Seismic tomograph ...
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 marke ...
. 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 marke ...
, such as
stock Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the Share (finance), shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporatio ...
prices, options prices, or other types of
derivative In mathematics, the derivative is a fundamental tool that quantifies the sensitivity to change of a function's output with respect to its input. The derivative of a function of a single variable at a chosen input value, when it exists, is t ...
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, computer scientist, cryptographer and inventor known as the "father of information theory" and the man who laid the foundations of th ...
. Shannon was the inventor of modern communication theory. He discovered the capacity of a communication channel by analyzing
entropy Entropy is a scientific concept, most commonly associated with states of disorder, randomness, or uncertainty. The term and the concept are used in diverse fields, from classical thermodynamics, where it was first recognized, to the micros ...
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 holds liquid assets and that makes use of complex trading and risk management techniques to aim to improve investment performance and insulate returns from market risk. Among these portfolio techniq ...
, such as Jim Simons'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. In 2015, A.N. Akansu and M.U. Torun published ''A Primer for Financial Engineering: Financial Signal Processing and Electronic Trading''. An edited volume with the title ''Financial Signal Processing and Machine Learning'' was published the following year. 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 by IEEE Signal Processing Society. Ei Compendex has indexed all papers included in its proceedings. The first ICASSP w ...
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, also known as Imperial, is a Public university, public research university in London, England. Its history began with Prince Albert of Saxe-Coburg and Gotha, Prince Albert, husband of Queen Victoria, who envisioned a Al ...
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. In June 2014, the group started a collaboration with the
Schroders Schroders plc is a British multinational asset management company headquartered in London, England. Founded in 1804, it employs over 6,000 people worldwide in 38 locations around Europe, America, Asia, Africa and the Middle East. It is traded on ...
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 Sai Kung District, New Territories, Hong Kong. Founded in 1991, it was the territory's third institution to be granted university status, and the firs ...
and Stanford University Convex Optimization Group led by Prof. Stephen Boyd at the
Stanford University Leland Stanford Junior University, commonly referred to as Stanford University, is a Private university, private research university in Stanford, California, United States. It was founded in 1885 by railroad magnate Leland Stanford (the eighth ...
. 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; * SkyBlue FS: Their SkyBlue OpenSignals product offers AI-powered signals and trade setups that can be accessed via API service.


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