代写Applied Mathematics & Statistics 553.441 and 553.641 Equity Markets and Quantitative Trading S

Syllabus

Applied Mathematics & Statistics 553.441 and 553.641

Equity Markets and Quantitative Trading

Spring 2024

(4 credits, EQ)

Description

This course introduces equity markets from a mathematical point of view.  The properties of equities and equity-linked instruments will be described.  Several quantitative trading strategies will be studied.  Order execution tactics and the effect of market structure will be analyzed. Students will select a specialized aspect of the equity markets to investigate and complete a related independent project.

Prerequisites

553.442/642 Investment Science or instructor’s permission

Lectures

Tuesday, Thursday, 9:00 –  10:15 am EDT in Shaffer 301 (and Zoom:  https://wse.zoom.us/j/ 95552411659?pwd=bDdsQkFNUWtuR25GczFCRTMwSDM3UT09)

The lectures will be primarily in person, although occasionally they may need to beheld online. Attendance at lectures is required,unless you are ill.  If you are feeling unwell, please contact me and stay home and watch on Zoom. We will arrange for you to make up any missed work.

Please note that we will have regular quizzes during class time, so if you need to miss class for some legitimate reason (illness, family emergency), please contact me as soon as possible, preferably prior to class, to arrange a make-up quiz.

Textbooks

Required: Algorithmic Trading: A Practioner’s Guide by Jeffrey Bacidore (and possibly one more textbook TBD)

Recommended: Active Portfolio Management by Grinold and Kahn

Warning on copyright and intellectual property

The materials that I present in this class (including lectures, slides and notes, homeworks, quizzes and examinations) are my intellectual property and I hold the copyright.  No class material may be posted anywhere without my permission! I spend entirely too much time sending “take-down” notices to dodgy websites. Please do not do this!

Online Resources

I will primarily communicate by email announcements, and will also sometimes post material to Canvas. Lectures may be recorded and posted to Canvas. Homeworks will be administered through Canvas.

Course Objectives

. Students will learn the basic principles of the equity market and how stocks are traded.

. Students will implement factor models and statistical arbitrage strategies, and will construct long/short portfolios that optimize expected risk and return.

. Students will study order types, algorithms and basic execution tactics for stock trading, and analyze the effect of market structure on optimal strategies.

. Students will become familiar with the common strategies of hedge funds and other equity invest- ment funds, and their trading of equity and equity-linked instruments.

. Students will work on a multi-disciplinary team to complete an independent project that will imple- ment a quantitative investment strategy and/or perform in-depth research on a particular technical aspect of the equity markets.

Course Topics

. Introduction to equity financing and effect on the balance sheet.

. Discounted dividend valuation model and the equity risk premium.

. Efficient market hypothesis and the capital asset pricing model.

. Factor models, arbitrage pricing theory and the Fama-Macbeth procedure.

. Time series analysis of factor returns.

. Use of factor models to model the risk of portfolios and construct portfolios that optimize risk and return.

. Overview and analysis of common hedge fund strategies (special situations, relative value, merger arbitrage, convertible arbitrage, statistical arbitrage, pairs trading).

. Types of stock market exchanges (order versus quote driven, dark pools, etc.)  and the effect of market structure on stock trading.

. Order types, algorithms and order execution tactics.

. Analysis of transaction costs and optimal order execution.

. Equity-linked instruments such as convertible bonds, and trading and investment strategies related to them.

ABET Outcomes

. Ability to apply mathematics, science and engineering principles (a).

. Ability to design and conduct experiments, analyze and interpret data (b).

. Ability to design a system, component, or process to meet desired needs (c).

. Ability to function on multidisciplinary teams (d).

. Ability to identify, formulate and solve engineering problems (e).

. Understanding of professional and ethical responsibility (f).

. Ability to communicate effectively (g).

. The broad education necessary to understand the impact of engineering solutions in a global and societal context (h).

. Recognition of the need for and an ability to engage in life-long learning (i).

. Knowledge of contemporary issues (j).

. Ability to use the techniques, skills and modern engineering tools necessary for engineering prac- tice (k).

Course Expectations & Grading

One midterm exam 15%

Final exam 25%

Independent team project 40%

Homeworks 5%

Attendance 5%

Quizzes 10%

Active participation in class is expected.

Key Dates

Last day to add: Fri Feb 2, 2024 at 12 pm (noon) ET

Last day for graduate students to switch to audit: Sun Mar 3, 2024 (SEAM)

Last day to drop: Sun Mar 3, 2024 (online)

Last day to withdraw (“W” on transcript): Fri Apr 12, 2024 at 4:30 pm ET (SEAM)

Midterm - early April (TBD)

Final exam - Mon May 13, 2024 from 9 pm to 9 pm ET

Ethics

The strength of the university depends on academic and personal integrity. In this course, you must be honest and truthful. Ethical violations include cheating on exams, plagiarism, reuse of assignments, improper use of the Internet and electronic devices, unauthorized collaboration, alteration of graded assignments, forgery and falsification, lying, facilitating academic dishonesty, and unfair competition.

Report any violations you witness to the instructor.

You can find more information about university misconduct policies on the web at these sites:

. Undergraduates: e-catalog.jhu.edu/undergrad-students/student-life-policies/   . Graduate students: e-catalog.jhu.edu/grad-students/graduate-specific-policies/

Students with Disabilities

Any student with a disability who may need accommodations in this class must obtain an accommodation letter from Student Disability Services, 385 Garland, (410) 516–4720, studentdisabilityservices@ jhu.edu.

Classroom Climate

As your instructor, I am committed to creating a classroom environment that values the diversity of expe- riences and perspectives that all students bring.  Everyone here has the right to be treated with dignity and respect. I believe fostering an inclusive climate is important because research and my experience show that students who interact with peers who are different from themselves learn new things and experience tan- gible educational outcomes. Please join me in creating a welcoming and vibrant classroom climate. Note that you should expect to be challenged intellectually by me, the TAs, and your peers, and at times this may feel uncomfortable. Indeed, it can be helpful to be pushed sometimes in order to learn and grow. But at no time in this learning process should someone be singled out or treated unequally on the basis of any seen or unseen part of their identity.

If you ever have concerns in this course about harassment, discrimination, or any unequal treatment, or if you seek accommodations or resources, I invite you to share directly with me or the TAs. I promise that we will take your communication seriously and to seek mutually acceptable resolutions and accommodations. Reporting will never impact your course grade. You may also share concerns with the department head Fadil

Santosa, the Director of Undergraduate Studies Donniell Fishkind, the Assistant Dean for Diversity and Inclusion (Darlene Saporu, [email protected]), or the Office of Institutional Equity ([email protected]). In handling reports, people will protect your privacy as much as possible, but faculty and staff are required to officially report information for some cases (e.g. sexual harassment).