APIs Helping Drones Generate Alpha Used In High Frequency Trading
26 Oct 2016
One of the things I love about my world as the API Evangelist is the time I get diving into rabbit holes and learning about different areas where technology is being applied. I do not always agree with the business motivations behind what is going on, which can result in some often pretty shady situations, but I enjoy stepping back and understanding the data, API and approaches behind what is going on.
I was doing some research on drone APIs recently, and as I was falling down the rabbit hole, I found myself reading about drones being a source of alpha? WTF is alpha? I had no idea and wanted to learn more about what an alpha generation platform was, and how drones and APIs are playing a role--here is the definition I found:
An alpha generation platform is a technology solution used in algorithmic trading to develop quantitative financial models, or trading strategies, that generate consistent alpha, or absolute returns. The process of alpha generation refers to generating excess returns.
The article that triggered this is about drones generating alpha was focused on the data generation, and communication capabilities of drones, and how they can be used in trading algorithms. Companies are looking to fly over crops, and predict yields, aggregate data, and add to the resources that available in the "alpha generation platform".
I'm not convinced of the reality of this approach, but it does provide for some interesting scenarios as I am learning about the data drones can gather, how this transfer occurs to the cloud, and be put to work using existing approaches to video, image, analysis, and visualization APIs. Also, it provides fuel for my alternate design fiction writing, where I explore the possibilities of technology, both good and bad.
From what I understand, this type of data would be considered "dirty" in the alpha workflow, in the same category of other data, you might gather from Amazon sales, Twitter sentiment, and other common API implementations. It's experimental, and not proven (yet) to produce the consistent or absolute returns I guess. What the article is discussing, are just early discussions, speculations, and desires of people looking to create a market--interesting fairy tales to tune into. Well, this is how markets operate right? On stories?
I'm adding high-frequency trading and alpha generation to my list of sectors potentially being impacted by drones. Another area I'm diving into that intersects with this work are satellite APIs. Satellite and drones intersect as drones are being used to fill in where satellite imagery can fall short (weather, low level buildings, etc.), but satellites are also being used as an alpha generation tool for high-frequency trading. I'm guessing drones and satellites are going to overlap with many other sectors like agriculture, mining, and the environment.
Lots of API and drone goodness to keep my mind busy.