- Lecturer: Leandro Sanchez Betancourt
Course term: Hilary
Course lecture information: 8 lectures
Course overview:
This course covers different aspects of algorithmic and high frequency trading. We start by studying how the limit order book works, the various types of orders available, and the price impact of trading. We then 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 and we then study a few continuous-time formulations. We then introduce the optimal market making problem à la Avellaneda-Stoikov and discuss several generalisations. The course finishes illustrating how one can use reinforcement learning to solve these problems, together with their advantages and disadvantages.
Course synopsis:
Electronic markets. Almgren-Chriss model in discrete time. Optimal trading with predictive signals. Brokers, informed, and uninformed traders. Optimal trading with transient impact. Optimal trading with limit orders. The market making problem. Providing liquidity to informed and uninformed traders. Reinforcement learning for trading.