'Algorithmic Trading and Its Implications on Capital Markets' PDF Download

Author: Sriram Kannan
Publisher:
ISBN:
Category :
Languages : en
Pages : 14

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Book Description
Algorithmic trading is generally defined as using computer-generated algorithms to create and execute orders on marketplaces. Recently, such algo-trading strategies are increasingly being associated with the negative impact on capital markets - both from a technological as well as a business perspective. However, there are positive effects of algorithmic trading too - such as increased liquidity and the elimination of market inefficiencies - that far outweigh the potential negative effects. Regardless of this, algo-trading has seen increasing popularity and acceptance on most of the major global markets, demanding well thought-out strategies that actually help traders and investors make more than a reasonable return on their investments. Objective of this paper is to:a) Categorize the types of algorithmic trading and describe their implications for capital markets.b) Describe how to accommodate algorithmic trading in markets, while minimizing potentialadverse effects. Discuss technology options and architectures to realize the same.c) Describe the use of special-purpose orders in the context of algorithmic trading.

Author: Robert Kissell
Publisher: Academic Press
ISBN: 0124016936
Category : Business & Economics
Languages : en
Pages : 492

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Book Description
The Science of Algorithmic Trading and Portfolio Management, with its emphasis on algorithmic trading processes and current trading models, sits apart from others of its kind. Robert Kissell, the first author to discuss algorithmic trading across the various asset classes, provides key insights into ways to develop, test, and build trading algorithms. Readers learn how to evaluate market impact models and assess performance across algorithms, traders, and brokers, and acquire the knowledge to implement electronic trading systems. This valuable book summarizes market structure, the formation of prices, and how different participants interact with one another, including bluffing, speculating, and gambling. Readers learn the underlying details and mathematics of customized trading algorithms, as well as advanced modeling techniques to improve profitability through algorithmic trading and appropriate risk management techniques. Portfolio management topics, including quant factors and black box models, are discussed, and an accompanying website includes examples, data sets supplementing exercises in the book, and large projects. Prepares readers to evaluate market impact models and assess performance across algorithms, traders, and brokers. Helps readers design systems to manage algorithmic risk and dark pool uncertainty. Summarizes an algorithmic decision making framework to ensure consistency between investment objectives and trading objectives.

Author: Walter Mattli
Publisher: Oxford University Press, USA
ISBN: 0198829469
Category : Business & Economics
Languages : en
Pages : 385

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Book Description
Global capital markets have undergone fundamental transformations in recent years and, as a result, have become extraordinarily complex and opaque. Trading space is no longer measured in minutes or seconds but in time units beyond human perception: milliseconds, microseconds, and even nanoseconds. Technological advances have thus scaled up imperceptible and previously irrelevant time differences into operationally manageable and enormously profitable business opportunities for those with the proper high-tech trading tools. These tools include the fastest private communication and trading lines, the most powerful computers and sophisticated algorithms capable of speedily analysing incoming news and trading data and determining optimal trading strategies in microseconds, as well as the possession of gigantic collections of historic and real-time market data. Fragmented capital markets are also becoming a rapidly growing reality in Europe and Asia, and are an established feature of U.S. trading. This raises urgent market governance issues that have largely been overlooked. Global Algorithmic Capital Markets seeks to understand how recent market transformations are affecting core public policy objectives such as investor protection and reduction of systemic risk, as well as fairness, efficiency, and transparency. The operation and health of capital markets affect all of us and have profound implications for equality and justice in society. This unique set of chapters by leading scholars, industry insiders, and regulators discusses ways to strengthen market governance for the benefit of society at whole.

Author: Ernie Chan
Publisher: John Wiley & Sons
ISBN: 1118460146
Category : Business & Economics
Languages : en
Pages : 230

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Book Description
Praise for Algorithmic TRADING “Algorithmic Trading is an insightful book on quantitative trading written by a seasoned practitioner. What sets this book apart from many others in the space is the emphasis on real examples as opposed to just theory. Concepts are not only described, they are brought to life with actual trading strategies, which give the reader insight into how and why each strategy was developed, how it was implemented, and even how it was coded. This book is a valuable resource for anyone looking to create their own systematic trading strategies and those involved in manager selection, where the knowledge contained in this book will lead to a more informed and nuanced conversation with managers.” —DAREN SMITH, CFA, CAIA, FSA, Managing Director, Manager Selection & Portfolio Construction, University of Toronto Asset Management “Using an excellent selection of mean reversion and momentum strategies, Ernie explains the rationale behind each one, shows how to test it, how to improve it, and discusses implementation issues. His book is a careful, detailed exposition of the scientific method applied to strategy development. For serious retail traders, I know of no other book that provides this range of examples and level of detail. His discussions of how regime changes affect strategies, and of risk management, are invaluable bonuses.” —ROGER HUNTER, Mathematician and Algorithmic Trader

Author: Yesha Yadav
Publisher:
ISBN:
Category :
Languages : en
Pages : 65

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Book Description
This Article argues that the rise of algorithmic trading undermines efficient capital allocation in securities markets. It is a bedrock assumption in theory that securities prices reveal how effectively public companies utilize capital. This conventional wisdom rests on the straightforward premise that prices reflect available information about a security and that investors look to prices to decide where to invest and whether their capital is being productively used. Unsurprisingly, regulation relies pervasively on prices as a proxy for the allocative efficiency of investor capital.Algorithmic trading weakens the ability of prices to function as a window into allocative efficiency. This Article develops two lines of argument. First, algorithmic markets evidence a systemic degree of model risk - the risk that stylized programming and financial modelling fails to capture the messy details of real-world trading. By design, algorithms rely on pre-set programming and modeling to function. Traders must predict how markets might behave and program their algorithms accordingly in advance of trading. This anticipatory dynamic creates steep costs. Building algorithms capable of predicting future markets presents a near-impossible proposition, making gaps and errors inevitable. Uncertainties also create incentives for traders to focus efforts on markets where prediction is likely to be most successful, i.e. short-term markets that have limited relevance for capital allocation. Secondly, informed traders - long regarded as critical to filling gaps in information and supplying markets with insight - have fewer incentives to participate in algorithmic markets and to correct these and other informational deficits. Competing with high-speed, algorithmic counterparts, informed traders can see lower returns from their engagement. When are less rich as a result.This argument has significant implications for regulation that views prices as providing an essential window into allocative efficiency. Broad swathes of regulation across corporate governance and securities regulation rely on prices as a mechanism to monitor and discipline public companies. As algorithmic trading creates costs for capital allocation, this reliance must also be called into question. In concluding, this Article outlines pathways for reform to better enable securities markets to fulfill their fundamental purpose: efficiently allocating capital to the real economy.

Author: Edward Leshik
Publisher: John Wiley & Sons
ISBN: 1119975093
Category : Business & Economics
Languages : en
Pages : 273

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Book Description
Interest in algorithmic trading is growing massively – it’s cheaper, faster and better to control than standard trading, it enables you to ‘pre-think’ the market, executing complex math in real time and take the required decisions based on the strategy defined. We are no longer limited by human ‘bandwidth’. The cost alone (estimated at 6 cents per share manual, 1 cent per share algorithmic) is a sufficient driver to power the growth of the industry. According to consultant firm, Aite Group LLC, high frequency trading firms alone account for 73% of all US equity trading volume, despite only representing approximately 2% of the total firms operating in the US markets. Algorithmic trading is becoming the industry lifeblood. But it is a secretive industry with few willing to share the secrets of their success. The book begins with a step-by-step guide to algorithmic trading, demystifying this complex subject and providing readers with a specific and usable algorithmic trading knowledge. It provides background information leading to more advanced work by outlining the current trading algorithms, the basics of their design, what they are, how they work, how they are used, their strengths, their weaknesses, where we are now and where we are going. The book then goes on to demonstrate a selection of detailed algorithms including their implementation in the markets. Using actual algorithms that have been used in live trading readers have access to real time trading functionality and can use the never before seen algorithms to trade their own accounts. The markets are complex adaptive systems exhibiting unpredictable behaviour. As the markets evolve algorithmic designers need to be constantly aware of any changes that may impact their work, so for the more adventurous reader there is also a section on how to design trading algorithms. All examples and algorithms are demonstrated in Excel on the accompanying CD ROM, including actual algorithmic examples which have been used in live trading.

Author: Álvaro Cartea
Publisher: Cambridge University Press
ISBN: 1316453650
Category : Mathematics
Languages : en
Pages : 360

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Book Description
The design of trading algorithms requires sophisticated mathematical models backed up by reliable data. In this textbook, the authors develop models for algorithmic trading in contexts such as executing large orders, market making, targeting VWAP and other schedules, trading pairs or collection of assets, and executing in dark pools. These models are grounded on how the exchanges work, whether the algorithm is trading with better informed traders (adverse selection), and the type of information available to market participants at both ultra-high and low frequency. Algorithmic and High-Frequency Trading is the first book that combines sophisticated mathematical modelling, empirical facts and financial economics, taking the reader from basic ideas to cutting-edge research and practice. If you need to understand how modern electronic markets operate, what information provides a trading edge, and how other market participants may affect the profitability of the algorithms, then this is the book for you.

Author: Michael Lewis
Publisher: W. W. Norton & Company
ISBN: 0393244660
Category : Business & Economics
Languages : en
Pages : 288

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Book Description
Argues that post-crisis Wall Street continues to be controlled by large banks and explains how a small, diverse group of Wall Street men have banded together to reform the financial markets.

Author: Markus Gsell
Publisher: Columbia University Press
ISBN: 3838261143
Category : Business & Economics
Languages : en
Pages : 227

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Book Description
Technological innovations are altering the traditional value chain in securities trading. Hitherto the order handling, i.e. the appropriate implementation of a general trading decision into particular orders, has been a core competence of brokers. Labeled as Algorithmic Trading, the automation of this task recently found its way both into the brokers' portfolio of service offerings as well as to their customers' trading desks. The software performing the order handling thereby constantly monitors the market(s) in real-time and further evaluates historical data to dynamically determine appropriate points in time for trading. Within only a few years, this technology propagated itself among market participants along the entire value chain and has nowadays gained a significant market share on securities markets worldwide. Surprisingly, there has been only little research analyzing the impact of this special type of trading on markets. Markus Gsell's book aims at closing this gap by analyzing the drivers for adoption of this technology, the impact the application of this technology has on markets on a macro level, i.e. how the market outcome is affected, as well as on a micro level, i.e. how the exhibited trading behavior of these automated traders differs from normal traders' behavior.

Author: Martin Ebers
Publisher: Cambridge University Press
ISBN: 1108424821
Category : Computers
Languages : en
Pages : 321

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Book Description
Exploring issues from big-data to robotics, this volume is the first to comprehensively examine the regulatory implications of AI technology.