Algorithmic trading

About: Algorithmic trading is a research topic. Over the lifetime, 6718 publications have been published within this topic receiving 162209 citations. The topic is also known as: algotrading & Algorithmic trading.

High Frequency and Dynamic Pairs Trading Based on Statistical Arbitrage Using a Two-Stage Correlation and Cointegration Approach

Abstract: In this paper, a high frequency and dynamic pairs trading system is proposed, based on a market-neutral statistical arbitrage strategy using a two-stage correlation and cointegration approach The proposed pairs trading system was applied to equity trading in US equity markets in any type of market cycle condition to capture statistical mispricing between the prices of each stock pair based on its residuals and to model the stock pairs naturally as a mean-reversion process The proposed pairs trading system was tested for out-of-sample testing periods with high frequency stock data from 2012 and 2013 Our trading strategy yields cumulative returns up to 5658% for portfolios of stock pairs, well exceeding the S&P 500 index performance by 3435% over a 12-month trading period The proposed trading strategy achieved a monthly 267 Sharpe ratio and an annual 925 Sharpe ratio Furthermore, the proposed pairs trading system performed well during the two months in which the S&P 500 index had negative returns Thus, the trading system might be especially more profitable at times when the US stock market performed poorly Therefore, the performance returns of the proposed pairs trading system were relatively market-neutral and were positive regardless of the performance of the S&P 500 index

Market quality changes in the London Stock Market

Abstract: This paper examines the impact that the introduction of a closing call auction had on market quality at the London Stock Exchange. Using estimates from the partial adjustment with noise model of Amihud and Mendelson [Amihud, Y., Mendelson, H., 1987. Trading mechanisms and stock returns: An empirical investigation. Journal of Finance 42, 533–553] we show that opening and closing market quality improved for participating stocks. When we stratify our sample securities into five groups based on trading activity we find that the least active securities experience the greatest improvements to market quality. A control sample of stocks are not characterized by discernable changes to market quality.

Power exchange spot market trading in Europe: theoretical considerations and empirical evidence

Abstract: This paper discusses exchange-based spot market trading of electricity in Western Europe, both from a theoretical and an empirical perspective. The theoretical section contains a selection of references to recent and seminal research in this field of research, and touches upon issues such as the dealing with grid constraints, modelling of bidding systems, bidding strategies, types of auctions, pricing and matching rules, types of spot markets, trading systems, and the main benefits and success factors of power exchanges. In the empirical part, it provides an overview of the main features and the functioning of the major existing (and planned) power exchanges in Europe (i.e. APX, Borzen, EEX, EXAA, GME, Nord Pool, OMEL, Powernext, UKPX, and APX UK). The article ends with a glossary of selected terms that are important in this field of research. The information contained should provide useful for the design of bidding tools that can be used by power-only and combined-heat-and-power (CHP) generating companies for generating bids in a liberalised power market environment. JEL Classification Nos.: C62, C78, D44, D81, R32;

Algorithmic trading : winning strategies and their rationale

Abstract: Preface ix CHAPTER 1 Backtesting and Automated Execution 1 CHAPTER 2 The Basics of Mean Reversion 39 CHAPTER 3 Implementing Mean Reversion Strategies 63 CHAPTER 4 Mean Reversion of Stocks and ETFs 87 CHAPTER 5 Mean Reversion of Currencies and Futures 107 CHAPTER 6 Interday Momentum Strategies 133 CHAPTER 7 Intraday Momentum Strategies 155 CHAPTER 8 Risk Management 169 Conclusion 187 Bibliography 191 About the Author 197 About the Website 199 Index 201

Centralized electronic currency trading exchange

Abstract: The invention is a system, method and computer software application for electronic currency trading exchange. It creates a centralized electronic marketplace for currency trading in which a central processing server automatically matches buy and sell orders for a plurality of currency pairs, and where trades registration, clearing and settlement are centrally performed. The invention further provides a method of presentation of foreign exchange currency buy/sell orders and executed trades data displayed by means of graphical user interfaces for showing buy/sell orders prices for all price levels and executed trades prices and volumes. Government central banks, commercial banks and selected brokers-dealers worldwide will participate in trading as Exchange Members of the trading exchange thus enabling them to trade with each other on one centralized currency trading marketplace. Other brokers-dealers and individual traders will trade on the exchange by establishing business relations and signing special agreements with Exchange Members. Exchange Members and other exchange traders will receive a computer software application with an Orders graphic user interface for sending buy and sell orders to the disclosed system. Trades will be created by matching the orders, they will be registered on the on the system's central processing server and then will be transferred for clearing and settlement. Trades details will be disseminated to Exchange Members and then further to their clients and correspondents.