The bid–ask spread (also bid–offer or bid/ask and buy/sell in the case of a market maker) is the difference between the prices quoted (either by a single market maker or in a limit order book) for an immediate sale (ask) and an immediate purchase (bid) for stocks, futures contracts, options, or currency pairs in some auction scenario. The size of the bid–ask spread in a security is one measure of the liquidity of the market and of the size of the transaction cost. If the spread is 0 then it is a frictionless asset.
See Bid-ask spread.
A type of algorithmic trading characterized by high speeds, high turnover rates, and high order-to-trade ratios. HFT firms make up the low margins with incredibly high volumes of trades, frequently numbering in the millions.
- Sophisticated algorithms
- Short-term investment horizons
- Sophisticated technological tools and computer algorithms to rapidly trade securities
- Proprietary trading strategies carried out by computers to move in and out of positions in seconds or fractions of a second
- DeFi: Decentralised Finance
- Value at risk (VaR)
- A derivative is a price guarantee
- Buyer/seller (counterparties), underlier, future price, future date,
- Forward, futures, swap, option
- Liquid: more traded on a single day
- Fungible: one is as good as another
- A financial instrument is a standard agreement (contract) that bestows certain financial rights and/or responsibilities to its parties
- Zero sum games
- Hedging, manage uncertainty
- Speculation, wager on uncertainty
- Taking a view: gambling
- Financial leverage
- Market makers, merchants of derivatives arbitrageurs, mispriced security search
- Delta one products are financial derivatives that have no optionality and as such have a delta of (or very close to) one -- meaning that for a given instantaneous move in the price of the underlying asset there is expected to be an identical move in the price of the derivative.
- Deal flow is a term used by finance professionals such as venture capitalists, angel investors, private equity investors and investment bankers to refer to the rate at which they receive business proposals/investment offers
See Wikipedia ).
There are 3 major blocks in an Algo Trading System
- Market Data Handler (e.g., FAST handler)
- Strategy Module (e.g., crossOver strategy)
- Order Router (e.g., FIX router)
Order management system
An order management system (OMS) is an electronic system developed to execute securities orders in an efficient and cost-effective manner. Brokers and dealers use order management systems when filling orders for various types of securities and are able to track the progress of each order throughout the system.
Fibre versus microwave
- IM between clients
- Most people in investment banking use Bloomberg
- Bloomberg Terminal
- All about derivatives Michael Durbin
- FX (currencies)
- Bloomberg lets you add trendiness etc.
- Banks: sale side (selling product, research) / market makers
- Two way price
- Middle men (like eBay)
- Proprietary trading (ceased because of regulations, own account)
- Many clients on the buy side: invest manager, hedge fund, pension
- Ask banks for prices on each thing
- Providing research
- Standard chartered: retail presence (taking deposits from consumers)
- Old school: give a loan against deposit
- Issue bond to bunch of investors
- Small investment managers
- Algorithmic trading
- Options pricing model