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Alternative Market Briefing

John Locke's CEO Bonnin (2): Stepping up from trend following to Machine Learning, Chains of Markov, Support Vector Machines and Kelly Rule

Wednesday, February 10, 2010

Benedicte Gravrand, Opalesque London:

Part One of the interview ("How Bonnin discovered the world of quant and why the French like it so") was published yesterday and can be found here.

Challenges for CTAs The big challenge, according to François Bonnin, is to be in research and to uncover more and more behaviours in the markets. As technology is evolving, it is doing some very impressive things.

"I recently heard, for example, of new software that is capable of distinguishing a person drowning from a person who is making some strange movements and playing," Bonnin said during the Opalesque video interview in Paris last month (view Part Two here). "Such things are only feasible thanks to new venues of research. It is quite similar in finance, if you think of the way prices form; it's people coming together and buying and selling things. This is like a vote in a way, and the more people buying and selling (or, the greater the liquidity of an instrument), the more information is embedded into the price."

Analysing this information with statistical, probabilistic methodologies can help decide what is going on and what course of action to take to protect, to manage risk, to take advantage of opportunities, to forecast and derive some alpha from the market.


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