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Books on algo-trading and quant trading. Serious math approach.

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Sergiy Podolyak
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Sergiy Podolyak 2015.09.04 08:15 

Books on algo-trading and quant-trading. This is a serious math.

List taken from https://quantivity.wordpress.com/2010/01/12/how-to-learn-algorithmic-trading-part-3/

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Begin with standard introductory financial time series asset dynamics, volatility, and forecast modeling:

  • Analysis of Financial Time Series, by Tsay: standard applied time series text for financial econometrics
  • Market Models: A Guide to Financial Data Analysis, by Alexander: excellent introduction to financial modeling and forecast
  • Asset Price Dynamics, Volatility, and Prediction, by Taylor: classic text on financial modeling and forecast

Proceed to modern portfolio theory and financial engineering:

  • Modern Portfolio Theory and Investment Analysis, by Elton et al.: standard text on modern portfolio theory
  • Options, Futures and Other Derivatives, by Hull: standard reference for introductory financial engineering
  • Active Portfolio Management, by Grinold & Kahn: standard introduction to quantitative portfolio management by the BGI guys who invented it
  • Principles of Financial Engineering, by Neftci: intermediate financial engineering

Continue on to volatility for options and correlation / dispersion for arb:

  • Volatility and Correlation, by Rebonato: excellent coverage of volatility and correlation
  • Volatility Trading, by Sinclair: volatility arbitrage by a retail practitioner
  • Volatility Surface, by Gatheral: theoretical coverage of vol models, by well-known researcher
  • Options as a Strategic Investment, by McMillan: classic introductory text on derivative hedging and volatility trading
  • Option Volatility & Pricing, by Natenberg: dated practitioner introduction to volatility trading

Finally, delve into high-frequency & market microstructure to enjoy foundations of modern buy and sell sides:

  • Trading and Exchanges: Market Microstructure for Practitioners, by Harris: practitioner introduction to stylized financial microstructure effects
  • An Introduction to High-Frequency Finance, by Dacorogna et al.: theoretical and dated practitioner introduction to HF, with emphasis on FX
  • Empirical Market Microstructure, by Hasbrouck: intermediate equity market microstructure, with coverage of standard theoretical models
  • Microstructure Approach to Exchange Rates, by Lyons: intermediate FX market microstructure, covering both theory and empirical models (bit dated)
  • Market Microstructure Theory, by O’Hara: classic introduction to microstructure theory; now dated
  • Optimal Trading Strategies, by Kissell and Glantz: practitioner introduction to market impact and optimal execution

From here, readers can happily delve into the journal literature.

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I can add here

Francesca Taylor "Mastering foreign exchange & currency options".

Note: most of it is all about pairs traiding (and options trading particularly), because the best math authors are now hired by big banks. And big banks prefer lower profits with low risk than higher profits with higher risk. And pairs traiding can provide this to banks.

How to Learn Algorithmic Trading: Part 3
How to Learn Algorithmic Trading: Part 3
  • quantivity.wordpress.com
Third in a series on learning quantitative / algorithmic trading, this post focuses on financial modeling and analysis, assuming understanding of financial mathematics from Part 2 and overview of quantitative trading from Part 1. After digesting these, readers should be capable of both building interesting systematic trading systems and...
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