Parallax Financial Research, Inc., is a scientific research boutique in Redmond, WA. The firm empowers professional money managers with a distinct edge through its unique fundamental and quantitative models. Our models are composed of individual “predictors” which are based on the financial application of chaos and complexity theories, and presented in clear, trustworthy visualizations. These predictors are blended into forecasting models using genetically-enhanced neural networks. Our careful application of these mathematical modeling techniques yields unique and powerful solutions to enhance manager performance.
Chaos theory is the scientific theory of non-linear systems. These are systems in which some of the outputs are fed back as new inputs, forming the next set of outputs, and so on. Auction markets exhibit positive feedback as buying leads to higher prices attracting more buying in a loop, and negative feedback as undervaluation leads to buying and overvaluation to selling. By understanding the theoretical characteristics of feedback systems and how to measure it, Parallax has been able to build better predictors than has previously been possible.
Complexity theory is the scientific theory of multi-agent systems, where the agents follow simple common rules, but in doing so produce non-random emergent patterns. In the case of markets, the investment agents pursue price and are attracted and repulsed from certain key price levels. What emerges are geometric patterns not unlike flocking birds, as well as self-organized critical states that are ripe for reversals.
Parallax uses neural networks throughout its product line to blend predictive factors. A neural network is a mathematical tool that learns by example. By providing neural networks with predictive historical data, the networks learn to weight each predictor during training, so a final buy/hold/sell forecast can be generated in a consistent manner and with scientific objectivity.
The president of Parallax, S. Kris Kaufman, has degrees in both physics and math. He spent over 15 years in geophysical research as a senior staff geophysicist and project manager for Halliburton subsidiary Sierra Geophysics. His projects included non-linear inversion modeling, 3-D seismic wave propagation modeling, and writing the first commercial 3-D wave propagation software for the oil industry (QUIKRAY and others).
Kaufman incorporated Parallax in 1990. Douglas Frick, vice president, has a master’s degree in Information and Computer Sciences, and a background in mathematics and software engineering. He is also a former employee of Sierra Geophysics.
The company develops and tests algorithms, incorporates them in practical software, licenses customers, and even delivers custom alerts at critical times. Parallax also provides one-on-one services to a few select money managers by incorporating its technology into the manager’s current investment discipline.