Course Catalog Description
This course will offer students an understanding of the main micro-structural features of financial markets, and the opportunity to test and practice different trading strategies.
The course concentrates on the operations of exchanges, trading systems and broker/dealer intermediaries. Students will have a high level view of the trading decision process, market structure design, and market structure regulation. The course is based on computer simulations that recreate a trading environment and the typical challenges faced by professional traders.
Prerequisites: QF301 or instructor permission
This course is for students with an interest in understanding how financial markets are organized, operate and how to trade under different market conditions. Participants may plan to work in the securities industry, investment management companies, IT management consulting or finance/treasury managers of any company interested to interact with sophisticated financial markets.
The main topics covered in this course are:
- Volatility applications: portfolio and risk management
- High frequency trading
- Nonlinear models: introduction to machine learning
- Algorithmic trading
- Introduction to equity trading & trading simulation
- Order driven and multiple markets
- Trading with public and private information
- Call auctions and dealer markets
- Dark pools and trading costs
- Conditional orders, price dynamic, order splitting algorithm
- Cost structure of trading fees and regulation
The course combines class presentations, exercises and trading simulations to develop the basic analytical and trading skills required in a professional trading environment.
By the end of this course, the students will be able to:
1. Evaluate different issues that affect the formulation of trading decisions, and market structure design.
2. Understand economic concepts such as market efficiency, and performance evaluation.
3. Take short term investment decisions with sound analytical considerations.
R. Schwartz, G. Sipress, and B.W. Weber, Mastering the Art of Equity Trading Through Simulation + Web-Based Software: The Traderex Course, Wiley Trading, 2010.
Ruey S. Tsay, An Introduction to Financial Data with R, Wiley, 2013 (chapters 5 and 6)
Barry Johnson, Algorithmic Trading and DMA, 4Myeloma Press, 2010 (only chapter 1 download <a class="external text" style="color: #663366; background: url('//upload.wikimedia.org/wikipedia/commons/2/23/Icons-mini-file_acrobat.gif') right center no-repeat; padding-right: 18px;" href="http://www.mediafire.com/file/kxa9gve6fxccbg6/algo-dma_preview.pdf" target="_blank" rel="nofollow">here</a> )
Joel Hasbrouck, Empirical Market Microstructure: The Institutions, Economics, and Econometrics of Securities Trading, Oxford University Press, 2007. (Chapter 3, 5.1-5.2 and 6. This book can be accessed electronically through the Stevens library)
Project:Trading simulations. This report should be based on the results of the trading simulations conducted in class.
Homework:Each homework submission should include the report and the code files used in the homework if applicable.
All homeworks and reports should be submitted through the course website. Students may discuss lecture and textbook materials, and how to approach assignments; however each student must submit his/her own solution. Students cannot share ideas in any written form: code, pseudocode or solutions. Students cannot submit someone else's work found through internet or any other source, or a modification of that work, with or without that person's knowledge, regardless of the circumstances under which it was obtained, copied, or modified. Homeworks should be submitted through the class website before the deadline.
Late policy: 1 point lost for one day late. No assignments accepted after 1 day late.If you dispute the grade received for an assignment, you must submit, in writing, your detailed and clearly stated argument for what you believe is incorrect and why. This must be submitted by the beginning of the next class after the assignment was returned. Requests for re-grade after the beginning of class will not be accepted. A written response will be provided by the next class indicating your final score. Be aware that requests of re-grade of a specific problem can result in a regrade of the entire assignment. This re-grade and written response is final; no additional re-grades or debate for that assignment.
There will be 12 quizzes (2.5 points each) during the course and your grade will be based on the best 10 grades. There will not be any make up quizz for any reason. The quiz will be taken at the beginning of the lab session or as indicated by the instructor.
||Introduction to Financial Engineering
||Ch. 1 and 2
| Week 2
||Capital Markets Overview
| Week 3
||Corporate Finance & Valuation
| Week 4
| Week 5
||Fixed Income Debt Securities
| Week 6
||Overview of Bonds Sectors & Instruments
| Week 7
||Valuation of Debt Securities
| Week 8
| Week 9
||Leveraged Loans & CLO's
| Week 10
||General Principles of Credit Analysis
| Week 11
| Week 12
||Poisson Processes and Jump Diffusion
| Week 13
| Week 14
||Review & Catch-up