IEEE CSS Distinguished Lecture: Predicting Extreme Events in Finance, Internet Traffic, and Weather
Monday, April 28, 2014
1:00 PM-2:00 PM
IEEE Philadelphia Section, IEEE Control Systems Society and the Drexel IEEE Graduate Forum present
Predicting Extreme Events in Finance, Internet Traffic, and Weather: Use of Heavy-Tailed Distributions
Dr. Mathukumalli Vidyasagar, Distinguished Lecturer, IEEE Control System Society Cecil & Ida Green Chair in Systems Biology Science,
Erik Jonsson School of Engineering & Computer Science, The University of Texas at Dallas
April 28, 2014, 1-2PM
Bossone Enterprise Research Center, Room 302
Abstract : As far back as 1963, Beniot Mandelbrot (who sadly passed away just a few weeks ago) pointed out that asset price movements in the real world don't follow the Gaussian distribution. Instead they are "heavy- tailed" -- that is, they display a kind of self-similarity and scale-invariance. Since then, similar patterns have been observed in extreme weather such as rainfall, and more recently, in Internet traffic. Recent research in "pure" probability theory shows that heavy-tailed random variables have some very unusual properties. For instance, if we average many observations of such variables, the averages move in a few large bursts instead of moving smoothly. Such behavior has indeed been observed in the stock market. The pervasiveness of heavy- tailed distributions in so many diverse arenas has implications for modeling, and risk mitigation. How do we design Internet traffic networks and storage servers if the volume of traffic is heavy-tailed? How do we hedge our equity positions if asset prices move in a heavy-tailed manner? In this talk I will describe the issues involved through a combination of intuitive arguments, visualizations, and formal mathematics. My hope is to inspire practicing engineers to become familiar with this fascinating class of models, and theoretical researchers to study the many open problems that still remain.
Biography : Dr. Mathukumalli Vidyasagar received the B.S., M.S. and Ph.D. degrees in electrical engineering from the University of Wisconsin in Madison, in 1965, 1967 and 1969 respectively. Between 1969 and 1989, he was a Professor of Electrical Engineering at Marquette University, Milwaukee (1969-70), Concordia University, Montreal (1970-80), and the University of Waterloo, Waterloo, Canada (1980-89). From 1989 to 2000 he was the Director of the Centre for Artificial Intelligence and Robotics (CAIR) in Bangalore, India and from 2000 to 2009 he was the Executive Vice President of Tata Consultancy Services. In 2009 he joined the Erik Jonsson School of Engineering & Computer Science at the University of Texas at Dallas, as a Cecil & Ida Green Chair in Systems Biology Science. In March 2010 he was named the Founding Head of the newly created Bioengineering Department. His current research interests are in the application of stochastic processes and stochastic modeling to problems in computational biology, and control systems. Dr. Vidyasagar has received a number of awards in recognition of his research contributions, including Fellowship in The Royal Society, the world's oldest scientific academy in continuous existence, the IEEE Control Systems (Field) Award, the Rufus Oldenburger Medal of ASME, and others. He is the author of eleven books and nearly 140 papers in peer-reviewed journals.