Market Microstructure and Algorithmic Trading (2024-25)

This course covers different aspects of algorithmic and high frequency trading. We look at how the limit order book works and devise trading algorithms. In particular, we look at the problems of optimal liquidation/acquisition and the problem of optimal market making. For the former, we discuss the classical Almgren-Chriss setting with permanent and instantaneous market impact. We then study a number of continuous-time formulations à la Cartea-Jaimungal, and we also consider the transient price impact model of Obizhaeva-Wang. We conclude by studying optimal market making à la Avellaneda-Stoikov discussing a number of generalisations.