How Confrontation Of Information And Flows Shapes Prices

Generic Presentation of Financial Maths in Practice

Talk at Ecole Des Ponts – May 21, 2025

Abstract

In this talk for the students of Ecole des Ponts, I tackle the subject of price formation on two time scales: firstly, on a large scale (which will enable me to discuss the use of data science in asset management), and then on the smallest scale (since this is where endogenous position adjustments and exogenous information flows meet).

Slides: How Confrontation Of Information And Flows Shapes Prices

Topics covered include

• the Grossman-Stiglitz paradox,
• alternative data (satellite images, maritime traffic, credit cards, etc.), their information content and their biases (from this point of view, the status of texts is interesting, as it allows us to approach the notion of repetition),
• then the role of the decision-making process in price formation, which introduces the notion of causality, and the role of financial instruments

flowchart LR
  Information --> Flows
  Flows --> P[Price Move]

• and finally optimal trading and market making.