Algorithmic Complexity of Financial Motions

We survey the main applications of algorithmic (Kolmogorov) complexity to the problem of price dynamics in financial markets. We stress the differences between these works and put forward a general algorithmic framework in order to highlight its potential for financial data analysis. This framework is “general" in the sense that it is not constructed on the common assumption that price variations are predominantly stochastic in nature.algorithmic information theory; Kolmogorov complexity; financial returns; market efficiency; compression algorithms; information theory; randomness; price movements; algorithmic probability

Around Kolmogorov complexity: basic notions and results

Algorithmic information theory studies description complexity and randomness and is now a well known field of theoretical computer science and mathematical logic. There are several textbooks and monographs devoted to this theory where one can find the detailed exposition of many difficult results as well as historical references. However, it seems that a short survey of its basic notions and main results relating these notions to each other, is missing. This report attempts to fill this gap and covers the basic notions of algorithmic information theory: Kolmogorov complexity (plain, conditional, prefix), Solomonoff universal a priori probability, notions of randomness (Martin-L\"of randomness, Mises--Church randomness), effective Hausdorff dimension. We prove their basic properties (symmetry of information, connection between a priori probability and prefix complexity, criterion of randomness in terms of complexity, complexity characterization for effective dimension) and show some applications (incompressibility method in computational complexity theory, incompleteness theorems). It is based on the lecture notes of a course at Uppsala University given by the author

Informational Substitutes

We propose definitions of substitutes and complements for pieces of information ("signals") in the context of a decision or optimization problem, with game-theoretic and algorithmic applications. In a game-theoretic context, substitutes capture diminishing marginal value of information to a rational decision maker. We use the definitions to address the question of how and when information is aggregated in prediction markets. Substitutes characterize "best-possible" equilibria with immediate information aggregation, while complements characterize "worst-possible", delayed aggregation. Game-theoretic applications also include settings such as crowdsourcing contests and Q\&A forums. In an algorithmic context, where substitutes capture diminishing marginal improvement of information to an optimization problem, substitutes imply efficient approximation algorithms for a very general class of (adaptive) information acquisition problems. In tandem with these broad applications, we examine the structure and design of informational substitutes and complements. They have equivalent, intuitive definitions from disparate perspectives: submodularity, geometry, and information theory. We also consider the design of scoring rules or optimization problems so as to encourage substitutability or complementarity, with positive and negative results. Taken as a whole, the results give some evidence that, in parallel with substitutable items, informational substitutes play a natural conceptual and formal role in game theory and algorithms.Comment: Full version of FOCS 2016 paper. Single-column, 61 pages (48 main text, 13 references and appendix

Preparation information and optimal decompositions for mixed quantum states

Consider a joint quantum state of a system and its environment. A measurement on the environment induces a decomposition of the system state. Using algorithmic information theory, we define the preparation information of a pure or mixed state in a given decomposition. We then define an optimal decomposition as a decomposition for which the average preparation information is minimal. The average preparation information for an optimal decomposition characterizes the system-environment correlations. We discuss properties and applications of the concepts introduced above and give several examples.Comment: 13 pages, latex, 2 postscript figure

Algorithmic information theory

This article is a brief guide to the field of algorithmic information theory (AIT), its underlying philosophy, and the most important concepts. AIT arises by mixing information theory and computation theory to obtain an objective and absolute notion of information in an individual object, and in so doing gives rise to an objective and robust notion of randomness of individual objects. This is in contrast to classical information theory that is based on random variables and communication, and has no bearing on information and randomness of individual objects. After a brief overview, the major subfields, applications, history, and a map of the field are presented

Decomposition Complexity

We consider a problem of decomposition of a ternary function into a composition of binary ones from the viewpoint of communication complexity and algorithmic information theory as well as some applications to cellular automata.Comment: Journ\'ees Automates Cellulaires 2010, Turku : Finland (2010

Dagstuhl Reports : Volume 1, Issue 2, February 2011

Online Privacy: Towards Informational Self-Determination on the Internet (Dagstuhl Perspectives Workshop 11061) : Simone Fischer-Hübner, Chris Hoofnagle, Kai Rannenberg, Michael Waidner, Ioannis Krontiris and Michael Marhöfer Self-Repairing Programs (Dagstuhl Seminar 11062) : Mauro Pezzé, Martin C. Rinard, Westley Weimer and Andreas Zeller Theory and Applications of Graph Searching Problems (Dagstuhl Seminar 11071) : Fedor V. Fomin, Pierre Fraigniaud, Stephan Kreutzer and Dimitrios M. Thilikos Combinatorial and Algorithmic Aspects of Sequence Processing (Dagstuhl Seminar 11081) : Maxime Crochemore, Lila Kari, Mehryar Mohri and Dirk Nowotka Packing and Scheduling Algorithms for Information and Communication Services (Dagstuhl Seminar 11091) Klaus Jansen, Claire Mathieu, Hadas Shachnai and Neal E. Youn

Expanding the Algorithmic Information Theory Frame for Applications to Earth Observation

Recent years have witnessed an increased interest towards compression-based methods and their applications to remote sensing, as these have a data-driven and parameter-free approach and can be thus succesfully employed in several applications, especially in image information mining. This paper expands the algorithmic information theory frame, on which these methods are based. On the one hand, algorithms originally defined in the pattern matching domain are reformulated, allowing a better understanding of the available compression-based tools for remote sensing applications. On the other hand, the use of existing compression algorithms is proposed to store satellite images with added semantic value

CoSaMP: Iterative signal recovery from incomplete and inaccurate samples

Compressive sampling offers a new paradigm for acquiring signals that are compressible with respect to an orthonormal basis. The major algorithmic challenge in compressive sampling is to approximate a compressible signal from noisy samples. This paper describes a new iterative recovery algorithm called CoSaMP that delivers the same guarantees as the best optimization-based approaches. Moreover, this algorithm offers rigorous bounds on computational cost and storage. It is likely to be extremely efficient for practical problems because it requires only matrix-vector multiplies with the sampling matrix. For many cases of interest, the running time is just O(N*log^2(N)), where N is the length of the signal.Comment: 30 pages. Revised. Presented at Information Theory and Applications, 31 January 2008, San Dieg