Financial Engineering: Quantitative Trading Analysis Based on Statistical Arbitrage

Course 11: Financial Engineering: Quantitative Trading Analysis Based on Statistical Arbitrage

I. Course Description

Hedge funds are a special type of investment fund whose goal is to manage risk and pursue high returns through a variety of complex trading strategies. Hedge fund characteristics include a high degree of flexibility, autonomy beyond the regulation of traditional investment funds, and often for high net worth investors. Although hedge funds have higher risk, they attract investors looking for diversified investment opportunities and high returns. Therefore, the chong fund plays an important role in the global financial market, providing investors with a different choice from the traditional investment, and providing the market with liquidity and price discovery functions.

This course explores statistical arbitrage: one of the most important hedge fund trading strategies, which itself includes and unifies various other strategies. We explore each major trading strategy style (value, spread, and momentum) and consider multiple potential time frames. For efficiency, the course will focus on stocks as the most understandable asset class, although the technology discussed can also be applied to other tools, including currencies, fixed income, commodities, derivatives, and cryptocurrencies.

II. Professor Introduction

Eric Yeh – Professor at Columbia University

Professor Eric Yeh received his bachelor's and master's degrees from Harvard University and is now serving as a professor of mathematics at Columbia University. In addition, Professor Eric Yeh has extensive experience in the financial industry, and he has held senior positions in Morgan Stanley, Deutsche Bank, Tower Research Capital and Alliance Bernstein.

Currently, he is Vermillion Leaf Capital LLC's president and an adviser to multiple investment managers, including the $100 million hedge fund he previously co-founded. His academic research focuses on finance, especially quantitative strategies in hedge funds. His contribution also extends to the practical application of the financial industry, and he combines theoretical insights with practical financial practice to make his courses particularly valuable to students who aspire to enter the financial field.

III. Syllabus

1. Introduction (Course overview; Introduction)
2. Transaction execution (buying and selling securities; securities market)
3. Portfolio construction (effective market and market price)
4. Stock (common stock; valuation of common stock)
5. Hedge funds (preface; arbitrage; short selling)
6. Equity fund (long-short equity; merger arbitrage)
7. Fund evaluation (hedge fund performance analysis)
8. Alpha (Alpha Design Introduction)
9. Alpha design (logic and examples; case study)
10. Alpha Source (share price and trading volume)