IBM, NAG, and Sun Microsystems have joined together to help establish a Centre for Computational Finance (OCCF) to experiment with the application of advanced physics and mathematical theory in support of financial market trading.
Opened yesterday by the chief secretary to the treasury and the deputy governor of the Bank of England, the centre is a collaboration between the Oxford University departments of physics, maths and computing and the three founding industrial partners.
IBM Data Management Solutions Informix Products has provided the real time data management infrastructure. Numerical Algorithms Group (NAG) was responsible for providing the analytical and visualisation software and Sun Microsystems has provided the UltraSparc based hardware platform and associated software. Market Information Services (MIS) and Reuters will also play a pivotal role in the initiative, providing integration services and data feeds respectively.
The centre will have the capacity to analyse real-time data and study the dynamics of today's markets, with the goal of facilitating faster reaction to extreme market events, such as predicting and dealing with market crashes, and evaluating all forms of operational risk.
The research in econophysics will involve the real time download of live data from financial markets. This data will form the basis of an on-going experiment, with the centre acting as a virtual laboratory, looking for significant underlying patterns in market activity. A trial "artificial market" has already been simulated using this live data and played against by traders at a City bank. This experiment has indicated that econophysics models may be able to compute the risks inherent in major transactions, enabling banks to weigh up the extent of their exposure and plan their strategy accordingly, believes the University.
For organisations looking to undertake specific confidential research, sponsorship of doctoral and post-doctoral research will be made available at OCCF, with the results remaining within the domain of the sponsor.
Physicist Dr Neil Johnson, director of OCCF, says: "The econophysics method of analysing financial markets is still evolving and the launch of Oxford Centre for Computational Finance consolidates Oxford University's position at the forefront of research in this area. Many of our graduates and undergraduates are now taking the opportunity to study econophysics - bringing the lab directly into a whole new world of City trading."