This course is a presentation of financial markets, trading mechanisms and their evolution dedicated to advancing the understanding and practice of electronic markets. A particular attention will be dedicated to optimal trading and execution technics but also on the use of algo trading startegies by market participants (who do what).
Students must be enrolled in courses Derivative Pricing and Stochastic Calculus 2 and Computational Finance, and must have past Derivative Pricing and Stochastic Calculus 1, Investments and Financial Markets.
Session 1: Evolution of financial markets & regulation, Identifying and trading on opportunities and market microstructure
Session 2: Trading cost analysis and electronic trading strategies. HFT for : Execution algo, Investing, Market making
Session 3: Execution algo introduction + Around the Almgren-Chriss model
Session 4: Investing and Market making
Session 5: Execution algo - Dynamic programming and trading strategies
Session 6: Execution algo - Limit order book and market making
Session 7: Execution algo - Reinforcement learning and beyond
Aldridge I., High-frequency trading, Wiley & sons, 2013.
Chan E., Algorithmic Trading- Winning Strategies and Their Rationale, Wiley, 2013.
Guéant O., The Financial Mathematics of Market Liquidity: From Optimal Execution to Market Making, Chapman and Hall, 2016.
Hasbrouck J., Empirical Market Microstructure, Oxford University Press, 2007
Lehalle C. A. and S. Laruelle, Market Microstructure in Pratice, World Scientific 2013.
Johnson B, Algorithmic Trading & DMA, Myeloma Press, 2010.
Group project (Teams of 2 students). 2 projects will be proposed.
Evaluation: Report + presentation