A Cheat Sheet for Algorithmic Trading of Investment Portfolios
18 Pages Posted: 23 Aug 2013
Date Written: August 2013
These working notes on algorithmic trading are designed as an introduction to the basic equations that govern the day-to-day trading of an investment portfolio to meet a predefined strategic asset allocation. The algebraic framework applies generally to long only and long/short strategies. It incorporates the use of leverage as well as the impact of trading costs on a portfolio. The presentation of the material is based on first principles. As such it assumes an elementary knowledge of linear algebra, but no particular expertise in finance or securities trading.
Keywords: algorithmic trading, portfolio trading, margin, leverage, trading costs, long short strategies, asset allocation
JEL Classification: C32, C51,C63, G11
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