Newborn Transition to Extrauterine Life

• Much of the work of the transition to extrauterine life is accomplished in the first 4-6 hours after delivery

Infants needing assistance

• Premature infants
• Infants with dystocia
• Infants requiring assistive delivery
• Infants with nonreassuring fetal heart rate patterns
• Infants with the presence of meconium

Thermoregulation System

• Newborn temperature is about 37.2°C (98.9°F) because of the warm environment of the uterus.

Reasons for heat loss

• Evaporation: Amniotic fluid on the infant evaporates

• Conduction: Transfer to a cooler surface in the delivery setting

• Convection: Transfer to surrounding cool air

• Radiation: Transfer to a cooler object not in contact in the window

• It takes 4 hours for an infant to stabilize.

• Term infants rely on brown fat for heat.

• Preterm infants don't have brown fat.

Algorithmic Trading

• Algorithmic trading uses computer programs to execute trades based on pre-defined instructions
• Also known as automated trading, black-box trading, or algo-trading
• Algorithms consider factors like price, timing, quantity, and mathematical models
• Algorithms range from simple rules to complex strategies such as market making, arbitrage, and trend following

Advantages of Algorithmic Trading

• Reduced transaction costs through automation
• Improved order execution speed
• Increased trading discipline by removing emotions
• Opportunity to back-test trading strategies

Order Placement

• Market Order: Executed immediately at the best available price, offering quick execution but price uncertainty
• Limit Order: Executed only at a specified price or better, giving price control but execution uncertainty
• Stop Order: Triggered when the price reaches a specified level, used to limit losses or protect profits
• Stop-Limit Order: Combination of stop and limit orders, triggered at a stop price and then becomes a limit order

Order Routing

• This is the process of directing orders to different market centers for execution
• Factors considered include price, speed, and liquidity
• Smart order routers (SORs) automatically find the best venue

Order Size and Fragmentation

• Iceberging: Large orders are broken into smaller ones to hide the total size
• Dark Pools: Trading venues that do not display order information offering anonymity but potential price discovery issues

Algorithmic Trading Strategies

Market Making

• Algorithms provide liquidity by placing buy and sell orders
• Goal is to capture the spread between bid and ask prices
• Requires inventory management and risk management

Arbitrage

• Exploits price differences in different markets or assets using statistical and triangular arbitrage
• Requires low-latency data and fast execution

Trend Following

• Identifies and follows trends in the market using technical indicators such as moving averages and breakout strategies
• Requires robust risk management and adaptability

Evaluating Algorithmic Trading Performance

Metrics

• Sharpe Ratio: Risk-adjusted return, calculated as $(R_p - R_f) / \sigma_p$, where $R_p$ is portfolio return, $R_f$ is risk-free rate, and $\sigma_p$ is portfolio standard deviation
• Information Ratio: Measures excess return relative to a benchmark, calculated as $(R_p - R_b) / \sigma_{p-b}$, where $R_p$ is portfolio return, $R_b$ is benchmark return, and $\sigma_{p-b}$ is tracking error
• Transaction Cost Analysis (TCA): Evaluates the cost of executing trades, considering market impact, slippage, and commission

Benchmarking

• Performance is compared against market indices, other algorithms, and human traders

Risk Management

• Essential includes position limits, stop-loss orders, and stress testing

Regulatory Considerations

Market Manipulation

• Algorithmic trading can be used for manipulative practices such as spoofing and layering

High-Frequency Trading (HFT)

• A subset of algorithmic trading characterized by high speed, high turnover, and high order-to-trade ratio
• Under regulatory scrutiny due to potential market impact

Regulations

• Aim to ensure fair and orderly markets through SEC Rule 15c3-5 (Market Access Rule) and MiFID II (Europe)

Challenges and Future Trends

Challenges

• Overfitting: Creating strategies that perform well in backtesting but fail in live trading
• Data Quality: Relying on inaccurate or incomplete data
• Complexity: Managing and monitoring complex algorithms

Future Trends

• Artificial Intelligence (AI): Using AI and machine learning to develop more adaptive and sophisticated algorithms
• Cloud Computing: Leveraging cloud infrastructure for scalability and cost-effectiveness
• Big Data: Analyzing large datasets to identify new trading opportunities