Algorithmic Trading

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Questions and Answers

What is the primary basis for determining the intensity of an earthquake using the Mercalli scale?

  • Observation of the damage caused by the earthquake. (correct)
  • Direct measurement of ground acceleration.
  • Calculation of the earthquake's magnitude using seismographs.
  • Analysis of the frequency and amplitude of seismic waves.

Which of the following effects would most likely be associated with a higher intensity rating on the Mercalli scale?

  • Brief disruption of electronic devices.
  • Slight shaking felt by a few people.
  • Minor displacement of small objects.
  • Widespread collapse of structures and ground deformation. (correct)

At what level on the Mercalli scale do most people feel the earthquake and some windows break?

  • Level VIII
  • Level VI
  • Level IV (correct)
  • Level II

Which of the following descriptions corresponds to level VII on the Mercalli scale?

<p>People run outdoors; damage is negligible in buildings of good design and considerable within poorly built or badly arranged structures. (B)</p> Signup and view all the answers

What is a typical observation associated with level V on the Mercalli scale?

<p>Some windows break; disturbance of trees and high poles. (C)</p> Signup and view all the answers

Considering the progression of damage on the Mercalli scale, which of the following would likely occur earliest as earthquake intensity increases?

<p>A few people feel it. (D)</p> Signup and view all the answers

If observers note that heavy furniture is moved, but only a few people run outside, what Mercalli intensity level is most probable?

<p>VI (B)</p> Signup and view all the answers

Which of the following is most indicative of an earthquake reaching level XI on the Mercalli scale?

<p>Most unreinforced masonry structures collapse. (B)</p> Signup and view all the answers

An earthquake is strong enough to bend railroad rails. Based on this observation, what is the minimum intensity on the Mercalli scale that the earthquake likely reached?

<p>X (D)</p> Signup and view all the answers

If an earthquake causes the ground to crack significantly and underground pipelines to break, which level is it most likely to be on the Mercalli scale?

<p>IX (C)</p> Signup and view all the answers

How does the Modified Mercalli Intensity (MMI) scale differ from the original Mercalli scale?

<p>The MMI scale has been updated and refined since the original was created in 1902. (B)</p> Signup and view all the answers

In comparing earthquakes, what critical distinction does the Mercalli scale offer versus magnitude scales like Richter?

<p>Quantifying observed effects and damage. (C)</p> Signup and view all the answers

If an earthquake occurs in a sparsely populated area and causes very little structural damage, what would be the limitation of using the Mercalli scale to assess its intensity?

<p>It would underestimate the intensity due to the lack of observable damage. (C)</p> Signup and view all the answers

Considering that the Mercalli scale is based on observed effects, why might its assessment of earthquake intensity vary between two locations equidistant from the epicenter?

<p>Different soil types and building construction can affect the level of damage. (A)</p> Signup and view all the answers

How is the Mercalli scale useful for understanding historical earthquakes for which instrumental measurements are unavailable?

<p>It can provide estimates of intensity based on descriptions of damage. (D)</p> Signup and view all the answers

What is a notable limitation of using the Mercalli scale to compare the severity of earthquakes across different regions with varying building standards?

<p>Damage observations are influenced by building practices, complicating direct comparisons. (D)</p> Signup and view all the answers

Imagine an earthquake occurs with sufficient magnitude to cause widespread damage; however, local building codes required earthquake-resistant construction. How would this impact the Mercalli scale reading?

<p>It would likely result in a lower Mercalli scale reading compared to an area with poor construction. (D)</p> Signup and view all the answers

An earthquake causes significant damage to poorly constructed buildings in one city, while another city with earthquake-resistant buildings experiences only minor damage. Which statement best describes the Mercalli scale intensities in these two cities?

<p>The city with poorly constructed buildings would likely have a higher Mercalli intensity. (B)</p> Signup and view all the answers

How does the Mercalli scale reflect the societal impact of an earthquake, beyond just physical damage?

<p>By correlating intensity levels with human reactions, such as people running outdoors or loss of control. (C)</p> Signup and view all the answers

An earthquake is assigned a low magnitude on the Richter scale but causes significant damage in an area with old, poorly constructed buildings. What would you expect the Mercalli scale intensity to be in that area?

<p>High, because the damage is significant due to vulnerable structures. (A)</p> Signup and view all the answers

Flashcards

Mercalli Scale

Based on observing earthquake damage, it uses 'degrees of intensity'. Created in 1902 and later modified.

I Degree (Mercalli)

Very few people feel it.

III Degree (Mercalli)

Some people feel it; slight vibration like heavy vehicles passing.

IV Degree (Mercalli)

Many feel it; dishes, windows, and doors vibrate; stationary vehicles rock.

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V Degree (Mercalli)

Everyone feels it; some windows break; swaying trees and poles are observed.

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VI Degree (Mercalli)

Everyone feels it; heavy furniture moves; people run outdoors; slight damage.

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VII Degree (Mercalli)

People run outside; slight structural damage in well-built buildings, considerable damage in poorly built ones; people find it hard to stand.

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VIII Degree (Mercalli)

Notable damage in well-designed buildings; poorly built structures suffer greatly; walls crack; heavy furniture overturns.

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IX Degree (Mercalli)

Considerable damage to all structures; ground cracks; pipes break.

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X Degree (Mercalli)

Considerable ground fissures; railroad tracks bend; water exits its basins.

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XI Degree (Mercalli)

Most structures collapse; underground pipelines rupture; landslides occur.

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XII Degree (Mercalli)

Total destruction; objects thrown into the air.

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Study Notes

  • Algorithmic trading is also known as automated trading or black-box trading.
  • It uses computer programs with algorithms to place trades based on price, time, quantity, or mathematical models.
  • Algorithmic trading is claimed to make markets more liquid and efficient.

Algorithmic Trading Example

  • A simple algorithmic trading strategy involves buying a stock when its 50-day moving average exceeds its 200-day moving average.
  • Conversely, sell the stock when its 50-day moving average falls below its 200-day moving average.

How Algorithmic Trading Works

  • Strategy identification involves spotting a potentially profitable trading approach.
  • Algorithm development involves creating an automated system to implement the trading strategy.
  • Backtesting involves evaluating the algorithm's profitability using historical data.
  • Real-time Implementation involves connecting the algorithm to a brokerage account for automated trade execution.

Types of Algorithmic Trading Strategies

  • Trend Following Strategies identify market trends and trade in their direction.
  • Mean Reversion Strategies identify assets deviating from their mean and trade in the opposite direction.
  • Arbitrage Strategies capitalize on price differences for the same asset across different markets.

High-Frequency Trading (HFT)

  • This is a subset of algorithmic trading that is defined by high speed, high turnover rates, and high order-to-trade ratios.
  • It uses algorithms to exploit small price discrepancies in the market.

Advantages of Algorithmic Trading

  • It executes trades faster than human traders.
  • It reduces transaction costs by automating the process.
  • It improves accuracy by reducing human error.
  • It increases efficiency because it can monitor the market 24/7.

Disadvantages of Algorithmic Trading

  • It is susceptible to technical issues.
  • It can exacerbate market volatility.
  • It requires specialized knowledge and skills.
  • There is a risk of over-optimizing trading strategies.

Algorithmic Trading Profitability

  • It can be profitable but is not a guaranteed way to make money.
  • Success requires knowledge, skill, and resources.
  • Thorough backtesting is essential to understand involved risks.

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