Quant Finance
Interested in MFE? Visit our Master of Sci. in Financial Engineering.
"A stable, efficient, and consistent modern society must be founded upon a solid financial system. From a student loan hatching a warm sunrise to a retirement fund securing a peaceful sunset, the so-called Main Street and Wall Street are actually bound together as the flesh and the bone do, mutually supporting and shaping each other.
Financial engineers therefore must recognize the profound social responsibilities on our shoulders, and become the forefront lines of defense of a stable, efficient, and consistent financial system. As a result, from data collection, model building and testing, system implementation, to the delivery of client services, we should emphasize the notion of risk-adjusted returns and passionately build a culture by which risk and returns are as inextricable as the universal entanglement of Yin-Yang."
Jackie Shen (2013)
Major Publications on Quant Finance /Financial Engineering:
1. Jackie Shen, White Paper - DQT Crypto Factor Models (online), a white paper for the first publicly released crypto factor model of production quality, by the Deep QuanTech, February, 2024.
2. Jackie Shen, Nine Challenges in Modern Algorithmic Trading and Controls, Algorithmic Trading and Controls, 1(1):1-9, 2021. Also at SSRN #3767062 or ArXiv.2101.08813.
[Keywords] Algos, liquidity, portfolio, correlation, special days, derivative pricing, universe, clustering, machine learning, auctions, shortfall, transaction cost, unit test, regression test, simulation, automated controls.
[Remark] We discuss nine major challenges that contemporary algorithmic trading faces. Some of them are at the strategy level while others are more concerned with the automated controls and risk management of algorithmic trading. Revenues and risks are the very Yin-Yang of algorithmic trading, and so are the smart quantitative strategies and automated risk controls. They are inseparable and should remain so.
3. J. Shen (April, 2020), A Stochastic LQR Model for Child Order Placement (COP) in Algorithmic Trading. SSRN #3574365.
[Keywords] Child order placement (COP), dynamic programming, LQR, delay cost, spread cost, impact cost, information leakage, Poisson hits, passive, aggressive, Bellman equation, optimal policy, positive definite matrix.
[Remark] It is impossible to encapsulate all realistic market complexities into a single clean and rigorous mathematical model for COP. In the spirit of reductionism, the current novel work presents a self-contained and rigorous dynamic programming COP model based on stochastic linear-quadratic regulators (LQR). It captures the intriguing interplay between aggressive sniping and passive sitting, and has a closed-form solution.
4. J. Shen (June, 2017), Hybrid IS-VWAP Dynamic Algorithmic Trading via LQR. SSRN #2984297.
[Keywords] Dynamic programming (DP), LQR, IS, VWAP, slippage, spread, delay cost, impact cost, Bellman equation, optimal policy, stability.
[Remark] We develop a solid DP trading model with closed-form solutions that are unconditionally stable, and more importantly, make actual economic sense. It is the first DP model implementing a quasi risk aversion mechanism that can only be achieved previously by static trading models.
5. J. Shen, A Pre-Trade Algorithmic Trading Model under Given Volume Measures and Generic Price Dynamics (GVM-GPD), Applied Math. Research eXpress, Oxford Univ. Press, 2015 (1): 64-98, 2015 (Also available at SSRN #2327835 (2013)).
[Keywords] Algorithmic trading, price dynamics, impact cost, quadratic programming, compact positive operator, Hilbert spaces.
[Remark] For the first time in the literature, we have solved the pre-trade problem comprehensively (i.e., honoring key clients constraints), completely (i.e., existence and uniqueness via infinite-dimensional Hilbert spaces), and practically (i.e., implementing via quadratic programming).
6. J. Shen and Y. Yu (October, 2014), Styled Dynamic Algorithmic Trading and the MV-MVP Style. SSRN #2507002.
[Keywords] Dynamic programming, style, moneyness, aggressive, passive, participation, parametric, stochastic, binomial trees.
Disclaimer: Picture artwork is copied or modified from the Internet.