Algorithmic Trading PDF

**Algorithmic Trading** 1.**Trading Strategies**- is the method of buying and selling in markets that is based on predefined rules used to make trading decisions. 2\. **Backtesting-** is applying a trading system to historical data to verify how that system would have performed during a specified...

**Algorithmic Trading** 1.**Trading Strategies**- is the method of buying and selling in markets that is based on predefined rules used to make trading decisions. 2\. **Backtesting-** is applying a trading system to historical data to verify how that system would have performed during a specified period. Traders and researchers can test diverse scenarios outside real-world trading. 3\. **Execution Algorithms** - are computer programs that are used by institutional investors, such as mutual funds and hedge funds, to buy and sell securities in the market in a more efficient and cost-effective manner. 4\. **Market Microstructure**- is a branch of finance concerned with theoretical, empirical and experimental research on how exchanges occur in markets. 5\. **High-Frequency Trading (HFT)-** HFT is a trading method that uses powerful computer programs to transact a large number of orders in fractions of a second. 6\. **Risk Management**- is the process of identification, analysis, and acceptance or mitigation of uncertainty in investment decisions. 7.  **AI-** Artificial intelligence technology allows computers and machines to simulate human intelligence and problem-solving capabilities. **Corporate Social Responsibility (CSR) Reporting** 1\. **Environmental Sustainability**- refers to the responsible management of natural resources to fulfill current needs without compromising the ability of future generations to meet theirs 2\. **Ethical Labor Practices**- refer to standards and guidelines that ensure fair treatment, respect, and dignity for all workers 3\. **Community Engagement and Development-** Community engagement is a strategic process to directly involve local populations in all aspects of decision-making, policy development and implementation. 4\. **Corporate Governance and Transparency** **Corporate governance** is the system of rules, practices, and processes by which a company is directed and controlled. **Transparency** is investor access to financial information about a company such as their prices, market position, and audited financial reports. 5\. **Diversity, Equity, and Inclusion (DEI)-** DEI refer to three separate, though connected, concepts: **Diversity** refers, in simple terms, to including people with different demographic characteristics such as race, sex, sexual identity, or disability. **Equity** refers to businesses offering different resources to account for privilege and power differences. **Inclusion** refers to whether people feel included and have a voice in decision making**.** 6\. **Human Rights** - are rights and freedoms that all people should have. Human rights include the right to life and liberty, freedom from slavery and torture, freedom of opinion and expression, and the right to work and education. 7\. **Impact Measurement**- enables investors to determine the outcomes of past investments and make better decisions regarding future ones **Foreign Exchange Risk Management** 1\. **Currency Hedging**- is an attempt to reduce the effects of currency fluctuations on investment performance. 2\. **Forward Contract** - is a customized contract between two parties to buy or sell an asset at a specified price on a future date. 3\. **Position Sizing**- refers to the size of a position within a particular portfolio, or the dollar amount that an investor is going to trade. 4\. **Stop-Loss Orders**- specify that a security is to be bought or sold at market when it reaches a predetermined price known as the stop price. 5\. **Diversification**- is an investment strategy based on the premise that a portfolio with different asset types will perform better than one with few 6\. **Leverage Management** - Leverage results from using borrowed capital as a source of funding when investing to expand a firm\'s asset base and generate returns on risk capital. 7\. **Interest Rate Differentials (Carry Trade)**- Carry trade is any strategy where an investor borrows capital at a lower interest rate to invest in assets with potentially higher returns. **Financial Inclusion Strategies** **1. Microfinance and microcredit** **Microfinance**, also called microcredit​, is a type of banking service provided to low-income individuals or groups who otherwise wouldn\'t have access to financial services. **Microcredit** is a common form of [microfinance](https://www.investopedia.com/terms/m/microfinance.asp) that involves an extremely small [loan](https://www.investopedia.com/terms/l/loan.asp) given to an individual to help them become self-employed or grow a small business. 2\. **Digital banking and fintech solutions**- **Digital banking** allows a user to conduct financial transactions via the internet using a browser or app. **Financial technology** (better known as fintech) is used to describe new technology that seeks to improve and automate the delivery and use of financial services. -**Fintech** is a portmanteau of the words "financial" and "technology," and refers to technologies used in the financial sector of the economy. This includes things such as online banking apps, online stock brokerages, and mobile payment apps. 3\. **Mobile payments and remittances** A **mobile payment** is a money payment made for a product or service through a portable electronic device such as a tablet or cell phone. -**A remittance** is a sum of money sent to another party, usually in another country. 4\. **Policy frameworks for inclusive finance** 5\. **Non-traditional financial institutions** 6\. **Financial literacy and education programs** **Financial literacy **is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing. 7\. **Public-private partnerships for financial access-** **Public**-**private partnerships** involve collaboration between a government agency and a private-sector company. **Family Office Management** 1\. **Wealth preservation-** Proper wealth preservation protects the value of your assets through various financial management and tax strategies. Wealth preservation relies on tax-efficient strategies to safeguard hard-earned assets, ensuring a lasting legacy for future generations. 2\. **Asset allocation and investment strategies** **Asset allocation** is how investors divide their portfolios among different assets that might include equities, fixed-income assets, and cash and its equivalents. **Investment strategy** refers to a set of principles designed to help an individual investor achieve their financial and investment goals. 3\. **Risk management**- is the process of identifying the potential downsides as well as the potential rewards of an investment. 4\. **Tax planning**- is the analysis of a financial situation or plan to ensure that all elements work together to allow you to pay the lowest taxes possible 5\. **Philanthropy-** is an effort an individual or organization undertakes based on an altruistic desire to improve human welfare. It refers to charitable acts or other good works, like efforts that help others or that contribute to the well-being of society overall on a grand scale. 6\. **Governance and family dynamics** **Governance** refers to the set of rules, controls, policies, and resolutions put in place to direct corporate behavior. **Family dynamics** refers to the ways in which family members interact. 7\. **Succession Planning-** Succession planning is the strategy for passing on leadership roles, and often the ownership of a company, to an employee or group of employees. **Peer-to-Peer Lending** 1\. **Credit risk assessment**- is the assessment of the credit risk of a counterparty against the financial institution\'s credit acceptance criteria, to ascertain the counterparty\'s ability and willingness to honour its credit obligations, either at origination or at any point during the lifetime of a credit. 2\. **Underwriting-** is the process through which an individual or institution takes on financial risk for a fee. 3\. **Transparency**- is investor access to financial information about a company such as their prices, market position, and audited financial reports. Is the access and proper disclosure of financial information, such as a company\'s audited financial reports. 4\. **Default risk-** is the risk a lender takes that a borrower will not make the required payments on a debt obligation, such as a loan, a bond, or a credit card. 5\. **Alternative lending**- is any form of financing that involves non-traditional banks or credit unions. 6\. **Lending efficiency-** 7\. **Investor protections**- The Investor Protection Act expanded the powers of the SEC and established a whistleblower reward for reporting financial fraud. The term Investor Protection is a wide term encompassing various measures designed to protect the investors from malpractices of companies, merchant bankers, depository participants and other intermediaries. **Machine Learning in Finance** 1\. **Predictive modeling for financial markets**- **Predictive modeling** is a statistical analysis of data used to generate future scenarios for organizations and companies. 2\. **Fraud detection and prevention-** refers to the strategies undertaken to detect and prevent attempts to obtain money or property through deception. 3\. **Risk management and credit scoring** **Risk management** is the process of identification, analysis, and acceptance or mitigation of uncertainty in investment decisions. **Credit scoring** is a statistical analysis performed by lenders and financial institutions to determine the creditworthiness of a person or a small, owner-operated business. 4\. **Portfolio optimization**- is a formal mathematical approach to making investment decisions across a collection of financial instruments or assets. 5\. **Sentiment analysis**- 6\. **Regulatory considerations and model explainability** **Regulatory considerations** refer to the set of laws, guidelines, and standards that govern the actions of individuals and organizations within a specific industry. 7\. **Neural networks and deep learning applications- Neural network** is a series of algorithms that endeavors to recognize underlying relationships in a set of data through a process that mimics the way the human brain operates. **Crowdfunding Platforms** **Crowdfunding** refers to raising money from the public (i.e., the \"crowd\"), primarily through online forums, social media, and crowdfunding websites to finance a new project or venture. Equity crowdfunding takes this one step further. In exchange for relatively small amounts of cash, public investors get a proportionate slice of equity in the business venture. 1**. Types of crowdfunding (equity, rewards, donation-based)** **Equity crowdfunding**- involves exchanging relatively small amounts of cash allowing investors to own a proportionate slice of equity in the business. **Reward-based crowdfunding**, backers contribute funds to your startup in exchange for a "reward," usually a product or service your company offers. **Rewards-based crowdfunding** consists of individuals donating to a project or business with the expectation of receiving a non-financial reward in return. **Donation-based crowdfunding** is a way of raising money by asking a large group of people to donate. Donation levels can be set with associated perks or rewards. **Donation-based crowdfunding** is different from loans or equity, in that there is no promise to repay or ownership stake. 2\. **Investor protection and regulation** (e.g., JOBS Act)- The term Investor Protection is a wide term encompassing various measures designed to protect the investors from malpractices of companies, merchant bankers, depository participants and other intermediaries. **Jumpstart Our Business Startups (JOBS) Act-** The JOBS Act allows companies to access funding in ways that were not allowed before due to securities regulations. It reduced regulation, including oversight and reporting, removed certain barriers, and allowed for new ways of accessing capital. 3\. **Platform fees-** Platform Fee means the fee charged to clients for using the website and services. 4\. **Campaign marketing**- Marketing campaigns comprise a series of strategic efforts to use marketing channels to achieve a certain business goal or objective. 5\. **Revenue models-** revenue model is a plan for earning revenue from a business or project**.** A revenue model is a blueprint for how a company produces income from its services or products. 6\. **Crowdfunding campaigns** 7\. **Social Media**- is digital technology that allows the sharing of ideas and information, including text and visuals, through virtual networks and communities **Hedge Fund Strategies** 1\. **Long/short equity strategies-** Long-short equity is an investment strategy that seeks to take a long position in underpriced stocks while selling short overpriced shares. 2\. **Global macro and event-driven strategies** A **global macro strategy** is a hedge fund or mutual fund strategy that bases its holdings primarily on political forecasts of various countries. An **event-driven strategy** is an investment strategy that seeks to generate value by taking advantage of stock mispricing that results from corporate events. 3\. **Risk arbitrage**- also known as merger arbitrage, is an investment strategy to profit from the narrowing of a gap of the trading price of a target\'s stock and the acquirer\'s valuation of that stock in an intended takeover deal. 4\. **Leveraging and short-selling techniques** **Leverage** refers to using debt (borrowed funds) to amplify returns from an investment or project. **Short selling** is a trading strategy where investors speculate on a stock\'s decline. Short sellers bet on, and profit from a drop in a security\'s price. 5\. **Merger arbitrage**- is the purchase and sale of the stocks of two merging companies at the same time with the goal of creating \"riskless\" profits. Is the business of trading stocks in companies that are involved in takeovers or mergers. 6\. **Performance evaluation and benchmarking** A **performance evaluation** --- also called a performance review or appraisal --- is a process that organizations follow to assess an employee\'s work quality. **Performance appraisal** refers to the regular review of an employee\'s job performance and overall contribution to a company. **Benchmark** is a standard that is used to measure the change in an asset\'s value or another metric over time 7\. **Market Neutral Strategy**- is a risk-minimizing strategy that entails a portfolio manager picking long and short positions so they gain in either market direction **Employee Stock Ownership Plans (ESOP)** 1\. **ESOP structure and governance-** An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company in the form of shares of stock. 2\. Tax advantages for companies and employees 3\. Valuation and share pricing of ESOP companies 4\. Employee motivation and retention 5\. Financing options for ESOPs 6\. Succession planning through ESOPs 7\. Regulatory and fiduciary requirements **Capital Structure Optimization** 1\. **Debt vs. equity financing**- **Debt financing** involves the borrowing of money, whereas **equity financing** involves selling a portion of equity in the company 2\. **Cost of capital and weighted average cost of capital (WACC)** **Cost of capital** is a calculation of the minimum return a company would need to justify a capital budgeting project, such as building a new factory. **Weighted Average Cost of Capital (WACC)** is a company\'s average after-tax cost of capital from all sources, including common stock, preferred stock, bonds, and other forms of debt. 3\. **Leverage and financial risk** **Leverage** refers to using debt (borrowed funds) to amplify returns from an investment or project. **Financial risk** is the possibility of losing money on an investment or a business venture. 4\. **Current Ratio**- is a liquidity ratio that measures a company\'s ability to pay short-term obligations or those due within one year. 5\. **Pecking order theory vs. trade-off theory** **Pecking order theory** states that a company should prefer to finance itself first internally through retained earnings. **Trade-off theory** of capital structure states that the firm value of a company can be maximized by determining its optimal mix of debt and equity. 6\. **Dividend policy and capital structure** **Dividend policy** outlines how a company will distribute its dividends to its shareholders. **Capital structure** is the particular combination of debt and equity a company uses to fund its ongoing operations and future growth. 7\. **Financial distress and restructuring** **Financial distress** occurs when income flows fail to meet the required spending outflows owed to outstanding obligations or needs. **Restructuring** is when a company makes significant changes to its financial or operational structure, **Regulatory Compliance in Finance** **1. Anti-money laundering (AML) and Know Your Customer (KYC) regulations** **Anti-money laundering** is an international web of laws, regulations, and procedures aimed at uncovering money that has been disguised as legitimate income. **Know Your Client (KYC)** is a standard used in the investment and financial services industry to verify customers and know their risk and financial profiles. 2\. **Dodd-Frank Act and Volcker Rule** **Dodd-Frank Act** targeted financial system sectors that were believed to have caused the 2007--2008 financial crisis and was meant primarily to reduce risk in the financial system by more closely regulating big banks and financial institutions. **Volcker Rule** is a federal regulation that generally prohibits banks from conducting certain investment activities with their own accounts. 3\. **Basel III and capital requirements** - **Basel III** is a set of reform measures intended to improve regulation, supervision, and risk management in the international banking sector. 4\. **MiFID II and financial transparency**- **MiFID II** ensures greater transparency by separating the charges for research and transactions 5\. **GDPR and data protection in finance** **General Data Protection Regulation (GDPR)** provides consumers with more control over how their personal data is handled and disseminated by companies. **General Data Protection Regulation** is a law that sets guidelines for the collection and processing of personal information from individuals. 6\. **SOX (Sarbanes-Oxley Act) compliance** **The Sarbanes-Oxley Act** of 2002 was passed by Congress in response to widespread corporate fraud and failures. The act implemented new rules for corporations, such as setting new auditor standards to reduce conflicts of interest and transferring responsibility for the complete and accurate handling of financial reports. To help protect investors from fraudulent financial reporting by corporations. 7\. **Regulatory Technology (RegTech) solutions**- **RegTech** is the management of regulatory monitoring, reporting, and compliance within the financial industry through technology. **Real Estate Investment Management** **1. Property acquisition and portfolio management** **Property acquisition** is a transaction in which one company purchases most or all of another company\'s shares to gain control of that company. Refers to the process of gaining ownership or rights over a real estate property. **Portfolio management** is the art of selecting and overseeing a group of investments that meet the long-term financial objectives and risk tolerance of a client. 2**. Real estate market analysis and valuation** 3\. **Risk management in real estate investing** 4\. **REITs (Real Estate Investment Trusts) and private equity** A **Real Estate Investment Trust (REIT)** is a firm whose shares you can buy that owns, manages, or finances income-producing properties. **Private equity** is an alternative investment class that invests in or acquires private companies that are not listed on a public stock exchange. 5\. **Financing and capital structures for real estate** **Financing-** is the process of providing funds for business activities, making purchases, or investing. **Capital structure**- is the particular combination of debt and equity a company uses to fund its ongoing operations and future growth. 6**. Legal and regulatory considerations in real estate** **Legal consideration-** is a valuable asset that is exchanged between two parties to a contract at the time of a promise or agreement **Regulatory considerations**- refer to the set of laws, guidelines, and standards that govern the actions of individuals and organizations within a specific industry. 7\. **Sustainable and green real estate investments** **Sustainable investing-** is property investing that considers factors beyond the financial implications of business decisions. **Green Real Estate-** This strategy applies environmentally sustainable practices to outperform current building standards in terms of energy and water efficiency **Working Capital Management** **1. Cash flow management and forecasting** **Cash flow management** is the process of planning, tracking, and controlling the movement of cash in and out of a business. A **cash flow forecast** (also known as a cash flow projection) involves estimating cash coming in and going out based on past business performance. **Forecasting** is a technique that uses historical data to make informed decisions about future events or conditions. 2\. **Accounts receivable and payable management** **Accounts receivable (AR)** is an item on a company\'s balance sheet that represents money due the company for products or services it has already delivered. Is an accounting term for money owed to a business for goods or services that it has delivered but not been paid for yet. **Payables management** is the handling of a company\'s unpaid debts to third-party vendors for purchases made on credit. 3\. **Inventory control and optimization** **Inventory control**, also known as stock control, refers to the process of managing a company\'s warehouse inventory levels. **Inventory optimization** is the process of strategically managing and controlling stock levels in order to maximize efficiency, minimize costs, and meet customer demand. 4**. Short-term financing solutions** (e.g., lines of credit) 5\. **Liquidity management and ratios** **Liquidity management** is the process of lessening liquidity risk, whether that is trading an asset like a stock, or a bank meeting cash requirements. **Liquidity ratios** are a class of financial metrics used to determine a debtor\'s ability to pay off current debt obligations without raising external capital. 6\. **Credit risk and debtor management** **Credit risk** is the possibility of loss due to a borrower\'s defaulting on a loan or not meeting contractual obligations. Learn how it works. **Debt management** is the process of planning your debt liabilities and repayments. **Debtor management** or accounts receivable management is the management of your outstanding invoices. 7\. **Impact of working capital on profitability**- Proper management of working capital is essential to a company\'s fundamental financial health and operational success as a business. **Data Analytics in Financial Decision-Making** **1. Big data and predictive analytics in finance** **Big data** refers to large, diverse sets of information that grow at ever-increasing rates. **Predictive analytics** is widely used in business and finance as well as in fields like weather forecasting, and it relies heavily on big data. 2\. **Business intelligence tools for financial reporting**- **Business intelligence (BI)** is a technology-driven process that analyzes business data and transforms it into actionable insights, helping executives and managers make better-informed decisions. **Business intelligence** represents the technical infrastructure that collects, stores, and analyzes company data. 3\. **Risk modeling and scenario analysis** **Model risk** occurs when a financial model used to measure a firm\'s market risks or value transactions fails or performs inadequately. **Scenario analysis** is the process of estimating the expected value of a portfolio after a given change in the values of key factors takes place. 4\. **Data visualization for financial insights** 5\. **Performance measurement and benchmarking** **Performance measurement** is the process used to assess the efficiency and effectiveness of projects, programs and initiatives. (benchmarking ara na definition above huhu) 6\. **Fraud detection and anomaly detection** **Fraud detection** is a specific research direction aiming to detect false pretenses of entities. **Anomaly detection**, also called outlier detection, is the identification of unexpected events, observations, or items that differ significantly from the norm