Speaker: Xiaolin Li Location: C107 Date and Time: May 23
About the Speaker: Dr. Xiaolin Li
• Professor, Dept. of Applied Mathematics and Statistics | Stony Brook University
• Assistant Professor, Dept. of Mathematics and Dept. of Computer Science| Indiana University-Purdue University at Indianapolis
• Assistant Professor, Department of Mathematics | New Jersey Institute of Technology
• Associate Research Scientist | Courant Institute of Mathematical Sciences
• Ph.D. in Applied Mathematics | Columbia University
• M.S. in Applied Mathematics | Columbia University
• B.S. in Physics | Wuhan University
Abstract
Fischer Black, Myron Scholes, and Robert Merton developed the Black-Scholes model for option pricing, a groundbreaking contribution that led to Myron Scholes and Robert Merton receiving the Nobel Prize in Economics in 1997. The model assumes that stock prices follow a log-normal Markov process, with the risk-free interest rate serving as the drift term. The work of James Simons and his firm, Renaissance Technologies, has shown that certain minority market behaviors are statistically predictable to some extent. In this talk, I will explore the progression from the binomial model to the Black-Scholes equation, and discuss the significance of its solution. Additionally, I will introduce a few low-entropy market groups that deviate from the standard Markov process, and explain how these deviations can be leveraged in stock trading and portfolio management. I will present a couple of real time simulations.