Introduction to Algorithmic Trading Strategies

Introduction to Algorithmic Trading Strategies

Course Description

This course is to introduce students to quantitative trading. Traders usually start with an intuition or a vague trading idea. �Using mathematics, they turn 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 the rigorous statistical tests, the traders implement the model on computer systems 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 sciences meet. �In this course, students study trading strategies from the popular 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

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Week	Topics	Readings	Homeworks
1	Overview of Algorithmic Trading	Lecturer handout
2	Hidden Markov Trading Model	Lecturer handout	hw1
3	Pairs Trading by Cointegration	Lecturer handout	hw2
4	Optimal Pairs Trading by Stochastic Control	Lecturer handout	hw3
5	Pairs Trading by Stochastic Spread Methods	Lecturer handout
6	Technical Analysis: Linear Trading Rules	Lecturer handout
7	Portfolio Optimization	Lecturer handout	hw4
8	Risk Management	Lecturer handout