| Special Interest Group on Finance: Probability and Statistics (FPS) |
| About FPS |
Traditionally research in probability theory has been driven byquestions arising from statistics, and from the sciences: from physicsand electrical engineering, to chemistry and biology. In more recenttimes microbiology has played an important role in the stimulation ofprobabilistic research. This has led to the development of a rich anduseful theory, but if one adds research stemming from economics, thevery nature of the subject changes, since the questions asked areoften unrelated to questions arising from the sciences. The mostimportant area in economics for its impact on probability theory ismathematical finance. Begun by the foundational work of LouisBachelier in 1900, it began to develop more rapidly with itsrediscovery by L. J. Savage and Paul Samuelson in the 1950s. The keybreakthrough was the development of the Black-Scholes-Merton theory inthe early 1970s, and since then the progress has been extraordinary,and has had a huge impact within society, easing the path ofinvestment through the effective transfer of risk for a price. Thisimpact has been reflected by intense student interest, a phenomenonexperienced by many mathematics and statistics departments across thecountry. The first research journal devoted exclusively for this subdiscipline (Mathematical Finance) was created in 1980, and the numberof similar research journals has now grown to over 20 titles. Due tothis interest, the IMS has recently formed a special interest group, and thismeeting will be the first held under its auspices, where leadingscholars will speak on the recent developments and trends of thetheory: the state of the present, and where it is headed in the future.
Statistical modeling has played a fundamental role in quantitativefinance, as exemplified by the mean-variance portfolio optimizationtheory, the Capital Asset Pricing Model, the conditional heteroskedastic models of asset returns, and the cointegrated vectorautoregressive models of the Nobel laureates Markowitz, Sharpe,Engle, and Granger. In the past decade, statistical trading strategies and statistical methods in risk management have spurredincreasing interest in the applications and the development ofinnovative statistical methods in finance.
Due to the growing interest in the interface of probability andstatistics with finance, the Institute of Mathematical Statisticshas recently formed a Special Interest Group on Finance: Probabilityand Statistics, co-chaired by Xin Guo (University of California at Berkeley), Tze-Leung Lai (Stanford University), and Philip Protter(Columbia University). All IMS members interested in thisinterface are invited to join by subscribing to the FPS maillist.Besides sessions in IMS meetings, the special interest group are organizingannual workshops. The inaugural workshop was held at Columbia University on June 23, 2011. And this year's workshop will be held at UC Berkeley, on May 30-31, 2012