Dr. Michael P. Wellman
Professor
Department of Computer Science
University of Michigan
wellman@umich.edu
Lecture Title:Â Computational Finance Models: Investigations of Credit Network Formation and Latency Arbitrage
Understanding the workings (economic performance, stability, etc.) of today’s financial systems requires consideration of critical computational ingredients in their behavior. The financial crisis of 2008 underscored the pivotal roles of information and trust networks in the systemic flow of credit. Trading in securities is increasingly conducted through, and by, algorithmic entities, at unprecedented degrees of speed and autonomy. I present results from recent studies from my research group in these two areas. First, using empirical game-theoretic methods, we investigate conditions for the formation of viable credit networks by self-interested agents. Second, through a simulation-based study of high-frequency trading on fragmented markets, we find that latency arbitrage degrades allocative efficiency. The results of this study also support our proposal to switch from continuous-time trading to a discrete-time mechanism, using one-second call markets.
Speaker Bio:
Michael P. Wellman is Professor of Computer Science & Engineering at the University of Michigan. He received a PhD from the Massachusetts Institute of Technology in 1988 for his work in qualitative probabilistic reasoning and decision-theoretic planning. From 1988 to 1992, Wellman conducted research in these areas at the USAF’s Wright Laboratory. For the past 20+ years, his research has focused on computational market mechanisms for distributed decision making and electronic commerce. As Chief Market Technologist for TradingDynamics, Inc. (now part of Ariba), he designed configurable auction technology for dynamic business-to-business commerce. Wellman previously served as Chair of the ACM Special Interest Group on Electronic Commerce (SIGecom), and as Executive Editor of the Journal of Artificial Intelligence Research. He is a Fellow of the Association for the Advancement of Artificial Intelligence and the Association for Computing Machinery.