Quantivity on learning algo

Nice post by Quantivity on learning about algo trading. I’m familiar with Harris and Hasbrouck, but not much else he mentions. I wonder if Quantivity rates the Penn Lehman Automated Trading project papers I’ve enjoyed so much ?  Maybe they don’t have enough hard maths to be taken seriously, but I rate Nevmyvaka et al on Optimal Execution.

Follow up comments on the post are interesting too. I’m intrigued by the strategies that firms like Getco are applying. They claim to be liquidity suppliers, so I guess they’re following some kind of market making, or perhaps, scalping approach. My guess is that it would be an automated version of what the Flipper did on Eurex. Of course such proprietary market making strategies are not constrained in the way that primary dealers offering govt bond liquidity on EuroMTS are constrained; there’s no requirement to make a two sided quote in minimum size with max spread for so many hours a day.

But that’s all just speculation. What I’d love to see would be worked examples showing order book state evolving as an algo trading strategy places orders and either allows them to execute to pulls them in response to book action. I’d expect to find more sophisticated versions of strategies like the one described here.

An Epic Search for Truth

A little off topic, but not too far, as this is all relevant to the foundations of computing. I just finished reading Logicomix: An Epic Search for Truth, a graphic novel on the quest for the foundations of maths. While Russell is the central character, all the usual suspects appear including Frege, Godel and Wittgenstein. The novel explains how Godel’s Theorem ended the quest in failure. But far from total failure, since the work of Russell, Godel and Hilbert provided the platform for Turing and Von Neumann, the creators of computing as we know it today. Toward the end it’s hinted that the authors may produce a sequel focusing on Turing, Von Neumann and computing. I hope they do, since they’ve made some very difficult material very accessible. Strongly recommended…

Lords of Finance II

Finished Lords of Finance over the Xmas break, and strongly recommend to any interested in financial history. The author concludes by summarising the causes of the Great Depression as four distinct crises: the German contraction in 1928, the Great Crash of 29, the US banking panics of 31-33 and the European financial crisis of 31. He compares these four to the Mexican peso crisis of 94, the dotcom crash in 2000, the recent credit crunch and the 97/8 Asian currency and Russian default crisis. Compelling stuff…