Optimization of Trading Physics Models of Markets

[Lester Ingber]

Optimization of Trading Physics Models of Markets
L. Ingber
R.P. Mondescu

Contact: Lester Ingber <mailto:ing...@ingber.com>

URL: http://www.ingber.com/markets01_optim_trading.ps.gz

Comments: Forthcoming, IEEE Trans. Neural Networks, 2001. Invited paper for
special issue on Neural Networks in Financial Engineering.

JEL Classification: G13

We describe an end-to-end real-time S&P futures trading
system. Inner-shell stochastic nonlinear dynamic models are
developed, and Canonical Momenta Indicators (CMI) are derived
from a fitted Lagrangian used by outer-shell trading models
dependent on these indicators. Recursive and adaptive
optimization using Adaptive Simulated Annealing (ASA) is used for
fitting parameters shared across these shells of dynamic and
trading models.