London, CQF

I gave my one day long lecture (for professional quants) titled "Intraday High-frequency Trading: From empirical evidences to quantitative optimization" (15 April - London).
It was very interesting and complementary to the lecture I give with J-G Attali to students at Paris VI master in finance.

The main goals of the course were :
- to give a clear idea of factors that affect intra day trading
- to explain how to capture some intra day statistical invariances (volume, volatility curves, etc)
- to be able to understand and implement papers on quantitative formalization of intra day trading

Content

1. practical aspects of auction markets
1.1 bid-ask spread, limit order books
- fixing auctions and continuous auctions
mechanisms and some funny computations
- from price impact to market impact
(from a "trade by trade" description to longest effects)
1.2 intra day trends
- volumes: do not use "average" on log normal distributions !
- volatility : do only add squared volatilities !
(a point on volatility high freq estimation)
- bid-ask spread : when microstructure limits the use of diffusion models
1.3 the two main enemies of intraday trading
- market impact (volume driven) demands to trade slowly
- market risk (volatility driven) demands to trade fast
- those two effects are mixed (market impact is correlated to volatility)
1.4 alternate sources of liquidity
- MTF (Chi-X, turquoise, etc)
- Dark pools
- what is a MiFID-compliant Smart Order Router ?

2. quantitative optimization of high freq trading
2.1 high freq trading in equations
- properly writing down point (1.3)
- cost minimization
- risk minimization
2.2 in the heart of darkness: market impact models
- Review of main models
- standard pitfalls
2.3 from simple to sophisticated optimization
(with simple tools: lagrangian optimization)
- simplest case: constant volatility and volumes
- simple case: random volumes
- useful case: stochastic volatility
- reallistic case: taking into account correlations
2.4 two main evolutions of stock trading
- market making
- portfolio trading
2.5 non parametric approaches
- implicit market impact models
- direct use of such models
2.6 misc
- interpretation of risk avertion