[Colloq] Talk: Christopher Darnell, GMO, LLC - Monday, Dec. 3

[Rachel Kalweit]

College of Computer and Information Science Colloquium

Presents:
Chris Darnell
GMO, LLC

Who will speak on:
Portfolio optimization, stochastic dynamic programming, and reinforcement learning


Monday, December 3, 2007
12:00 p.m. - 1:00 p.m.
366 West Village H
Northeastern University


Abstract:
The central problem of quantitative investment management is to learn the optimal mapping between an investor’s information set at time t and trading decisions at time t.  This general problem was replaced by Markowitz and others in the 1950’s with a simple single-period quadratic optimization problem called mean-variance optimization.  Half a century later, this stylized version of the original problem remains the academic and practitioner standard, despite enormous advances in the computational technology required to solve more useful representations of the problem.  At low trading frequencies, mean-variance optimization ignores important issues raised by optimal growth theory, and at high trading frequencies the single-period optimization is a poor approximation to the underlying stochastic dynamic programming problem.  Examples and open issues in low and high-frequency problems are discussed, along with a modern formulation of the original investment problem as a problem in reinforcement learning.  

Brief Biography
Christopher Darnell graduated from Yale University in 1977, summa cum laude, with degrees in mathematical economics and molecular biology, and received an MBA from Harvard University in 1979.  He has spent his professional career at GMO, LLC, a $150 billion Boston-based asset manager.  After working as a research analyst from 1979-1982, he co-founded with Jeremy Grantham GMO’s quantitative portfolio management business in 1983.  He went on to manage numerous U.S. and international equity portfolios, and has served as the firm’s director of global research.  Together with Dmitris Bertsimas at M.I.T. he was a Franz Edelman finalist for their work on portfolio optimization.  Today he is a member of GMO’s board of directors and firm-wide risk committee, and founded and heads GMO’s algorithmic hedge fund group.  

Host: Ravi Sundaram