Algorithmic and High-Frequency Trading

Code: MA668 | L-T-P-C: 3-0-0-6

Prerequisites: MA373 Financial Engineering - II or MA598 Mathematics of Financial Derivatives or MA 592 Mathematical Finance or equivalent

Course Content/ Syllabus: Trading in electronic markets, limit order book; Market making, informational advantage, informational disadvantage; Asset characteristics, inter-arrival times, non-Markovian price changes; Intraday activity, trading and market quantity; Stochastic optimal control, Dynamic Programming Principle (DPP), Dynamic Programming Equation (DPE), Hamilton-Jacobi-Bellman-Equation (HJBE); Optimal stopping; Optimal execution with continuous trading, optimal acquisition, optimal liquidation; Optimal execution with limit and market orders; Trading volume; Market making; Statistical arbitrage strategies, optimal band selection; Order imbalance, daily and intraday features.

Texts:

1. Alvaro Cartea, Sebastian Jaimungal and Jose Penalva, Algorithmic and High-Frequency Trading, 1st Edition, Cambridge University Press, 2015.
2. Irene Aldridge, High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems, 2nd Edition, Wiley, 2013