Over the years, major contributions to the literatures of economics and finance have been made by researchers associated with IIT.For example,

  • In 1947, Dr. Herbert Simon, Professor of Political Science, wrote his seminal book Administrative Behavior while at Illinois Tech.This book was the launching pad for his Nobel Prize-winning theories, which are the foundation of behavioral economics.
  • In 1959, Dr. Abe Sklar, Illinois Tech Professor of Applied Mathematics, invented the copula, which is used extensively in finance to describe dependence relationships between random variables.
  • In 1980, Dr. John Bilson, Illinois Tech Professor of Finance and Dean of the Stuart School of Business, was the first researcher to describe the profitability of the currency carry trade, portfolio management in currency trading, and the monetary approach to exchange rates.

Today, CSF Fellows are continuing this tradition of impactful research. New areas in finance pioneered by CSF Fellows include:

  • Statistical control of trading strategies
  • Capability theory of the high frequency trading firm
  • Performance attribution of absolute return strategies
  • Valuation of trading strategies as R&D projects
  • Ethics of algorithmic traders and trading strategies
  • Strategic management of organizations operating automated trading strategies
  • Development methodology for trading strategy R&D projects
  • Quality management systems for automated trading
  • Machine learning in high frequency finance
  • FinQL, a query language for time series financial data

Research at the CSF is broadly categorized into four focus areas: algorithimic/high frequency trading, portfolio management, derivatives pricing, and high performance computing in finance.

Algorithmic / High Frequency Trading

Phantom Liquidity and High Frequency Quoting
Journal of Trading
Blocher, Jesse | Vanderbilt University
Cooper, Rick | Stuart School of Business
Seddon, Jonathan | Audencia Nantes School of Management
Van Vliet, Ben | Stuart School of Business

How Does High Frequency Trading Affect Low Frequency Trading?
Journal of Behavioral Finance
Cooper, Rick | Stuart School of Business
Li, Kun | Beijing Normal University
Van Vliet, Ben | Stuart School of Business

Statistical Control of Trading Strategies


Automated Finance: The Assumptions and Behavioral Aspects of Algorithmic Trading
Journal of Behavioral Finance
Kumiega, Andrew | College of Computing
Van Vliet, Ben | Stuart School of Business

Whole Distribution Statistical Process Control in High Frequency Trading
Journal of Trading
Cooper, Rick | Stuart School of Business
Van Vliet, Ben | Stuart School of Business

Expected Capability Theory of Algorithmic/High Frequency Trading


A Behavioral Approach to the Lean Startup/Minimum Viable Product Process:
The Case of Algorithmic Financial Systems

International Journal of Innovation Management
Van Vliet, Ben | Stuart School of Business

Trading System Capability
Quantitative Finance
Kumiega, Andrew | College of Computing
Neururer, Thaddeus | Boston University School of Management
Van Vliet, Ben | Stuart School of Business

Multi-Scale Capability: A Better Approach to Performance Measurement for Algorithmic Trading
Algorithmic Finance
Cooper, Rick | Stuart School of Business
Ong, Michael | Michael K. Ong Risk Advisory
Van Vliet, Ben | Stuart School of Business

Capability Satisficing in High Frequency Trading
Research in International Business and Finance
Van Vliet, Ben | Stuart School of Business

Performance Attribution of Absolute Return Trading Strategies


Expected Return in High Frequency Trading
Journal of Trading
Cooper, Rick | Stuart School of Business
Van Vliet, Ben | Stuart School of Business

High Frequency Equity Performance Attribution
Journal of Performance Measurement
Cooper, Rick | Stuart School of Business
Li, Tingting | Stuart School of Business

Adding Derivatives to Absolute Return Attribution
Journal of Performance Measurement
Cooper, Rick | Stuart School of Business
Li, Tingting | Stuart School of Business

Absolute Return Equity Risk Attribution and Forecasting
Journal of Performance Measurement
Cooper, Rick | Stuart School of Business
Li, Tingting | Stuart School of Business

Valuation of Trading Strategies as R&D Projects


A Practical Real Options Approach to Valuing High Frequency Trading System R&D Projects
Journal of Trading
Kumiega, Andrew | Stuart School of Business
Van Vliet, Ben | Stuart School of Business

Ethics in Algorithmic Finance


Ethics, Finance, and Automation: A Preliminary Survey of Problems in High Frequency Trading
Science and Engineering Ethics
Davis, Michael | Lewis College of Science and Letters
Kumiega, Andrew | College of Computing
Van Vliet, Ben | Stuart School of Business

The Mysterious Ethics of High Frequency Trading
Business Ethics Quarterly
Cooper, Rick | Stuart School of Business
Davis, Michael | Lewis College of Science and Letters
Van Vliet, Ben | Stuart School of Business

Quality and Reliability for Algorithmic Trading


The Rationale for AT 9000: An ISO 9000-Style Quality Management System Standard for Automated and Algorithmic Trading
Journal of Trading
Van Vliet, Ben | Stuart School of Business
Cooper, Rick | Stuart School of Business
Kumiega, Andrew | College of Computing
Northey, Jim | FIX Protocol, Ltd.

Beyond the Flash Crash: Systemic Risk, Reliability, and High Frequency Financial Markets
Journal of Trading
Kumiega, Andrew | College of Computing
Sterijevski, Greg | CSF Industry Fellow
Van Vliet, Ben | Stuart School of Business

Portfolio Management

Benchmarking Commodity Investments
Journal of Futures Markets
Blocher, Jesse | Vanderbilt
Cooper, Rick | Stuart School of Business
Molyboga, Marat | Efficient Capital Management LLC

Time Diversification: Definitions and Some Closed-Form Solutions
Journal of Banking and Finance
Chung, Kee | SUNY Buffalo
Smith, William | University of Memphis
Wu, Tao | Stuart School of Business

Unconstrained Strategies and the Variance-Kurtosis Trade-Off
Applied Financial Economics
Kumiega, Andrew | College of Computing
Van Vliet, Ben | Stuart School of Business
Xanthopoulos, Apostolos | Loyola University of Chicago

A New Diagnostic Approach to Evaluating the Stability of Optimal Portfolios
Journal of Investing
Zhongjin Yang | Efficient Capital Management, LLC
Keli Han | Blackthorne Enterprise Network
Marat Molyboga | Efficient Capital Management, LLC
Georgiy Molyboga | Kiev University

Black-Litterman, Exotic Beta, and Varying Efficient Portfolios: An Integrated Approach
Journal of Investment Strategies
Cooper, Rick | Stuart School of Business
Molyboga, Marat | Efficient Capital Management, LLC

Derivatives Pricing

Nonparametric Interest Rate Cap Pricing: Implications for the 'Unspanned Stochastic Volatility'
Asia-Pacific Journal of Financial Studies
Wu, Tao | Stuart School of Business

Pricing and Hedging the Smile with SABR: Evidence from the Interest Rate Caps Market
Journal of Futures Markets
Wu, Tao | Stuart School of Business

Commodity Variance Risk Premia and Expected Futures Returns: Evidence from the Crude Oil Market
IIT Stuart CSF Working Paper
Kang, Solomon | Stuart School of Business
Pan, Xuhui | Tulane Freeman School of Business

Big Data / AI / High Performance Computing in Finance

Accelerating Value-at-Risk Estimation on Highly Parallel Architectures
Concurrency and Computation: Practice and Experience
Dixon, Matthew | Stuart School of Business
Chong, Jike | University of California, Berkeley
Keutzer, Kurt | University of California, Berkeley

FinQL: A Query Language for Big Data in Finance
Algorithmic Finance
Mulla, Julian | Center for Strategic Finance
Van Vliet, Ben | Stuart School of Business

Classification-based Financial Markets Prediction using Deep Neural Networks
Dixon, Matthew | Stuart School of Business
Klabjan, Diego | Northwestern University
Jin Hoon Bang | Northwester University

Implementing Deep Neural Networks for Financial Market Prediction on the Intel Xeon Phi
Dixon, Matthew | Stuart School of Business
Klabjan, Diego | Northwestern University
Jin Hoon Bang | Northwestern University

High Frequency Market Making with Machine Learning
Dixon, Matthew | Stuart School of Business

Other Research in Strategic Finance

An Alternative Model of Metcalfe's Law for Valuing Bitcoin
Economics Letters
Ben Van Vliet | Stuart School of Business

The Term Structure of Applied Dividend Yields and Expected Returns
Economics Letters
Bilson, John F.O. | Stuart School of Business
Kang, Solomon | Stuart School of Business
Luo, Hong | Stuart School of Business

Investor Behavior, Reporting Intervals and Hedge Fund Stability
Journal of Investing
Kumiega, Andrew | College of Computing
Neururer, Thaddeus | Boston University School of Management
Van Vliet, Ben | Stuart School of Business