Introduction to Algorithmic Trading Strategies, 2011-2013
Note: this course is superseded by the CQI introductory course: Introduction to Quantitative Investment
Course Description
This course introduces students to quantitative trading. A trader usually starts with an intuition or a vague trading idea. Using mathematics, s/he turns the intuition into a quantitative trading model for analysis, back testing and refinement. When the quantitative trading model proves to be likely profitable after passing rigorous statistical tests, the trader implements the model on a computer system for automatic execution. In short, quantitative trading is the process where ideas are turned into mathematical models and then coded into computer programs for systematic trading. It is a science where mathematics and computer science meet. In this course, students study trading strategies from the popular academic literature and learn the fundamental mathematics and IT aspects of this emerging field. By working on the class projects, they will gain hands-on experience. After satisfactorily completing this course, the students will have the necessary quantitative, computing, and programming skills in quantitative trading. They are therefore well prepared for a front office role in hedge funds or banks.
Course Outline
| Session | Topics | Readings | Homeworks |
| 1 | Overview of Algorithmic Trading | Lecturer handout | hw1 |
| 2 | Hidden Markov Trading Model | Lecturer handout | hw2 |
| lab | programming a hidden Markov chain | ||
| 3 | Pairs Trading by Cointegration | Lecturer handout | hw3 |
| lab | programming a cointegration model; parameter sensitivity analysis | ||
| 4 | Optimal Pairs Trading by Stochastic Control | Lecturer handout | hw4 |
| 5 | Pairs Trading by Stochastic Spread Methods | Lecturer handout | |
| lab | programming a Kalman filter; parameter calibration | ||
| 6 | Technical Analysis: Linear Trading Rules | Lecturer handout | |
| 7 | Portfolio Optimization | Lecturer handout | hw5 |
| lab | strategy & portfolio optimization | ||
| 8 | Risk Management | Lecturer handout |
Recommended Readings
Numerical Method’s collection of Quantitative/Algorithmic Trading Literature
Student Projects
- The quantitative trading strategies group projects for FE8827, 2011, Nanyang Technological University.
- The quantitative trading strategies group projects for QF5205, Fall 2011, National University Of Singapore.