So – 2009 was a great year for my continued sci-fi “reading”. I actually read perpetually – and the actual reading that I do is usually of the technical sort (quant finance, trading, software, teams, leadership, etc.). In the walking commute and during my daily running – I listen to audio books – quite a lot of them actually. I have been listening to audio books for maybe 5 or 6 years now and it is something that I really enjoy.

So – here are the audio books that I “read” this year in my order of preference:

Scott Lynch – The Lies of Locke Lamora (amazing – I love this book – can’t wait for the next ones – best book of the year!)

Robert Jordan, Brandon Sanderson - The Gathering Storm (Love it – can’t wait for the rest)

Patrick Rothfuss – The Name of the Wind (great 1st effort – I hope the rest is as good when it comes)

Brent Weeks – Night Angel Trilogy (fantastic series – fantastic magic thieves/ heros run amuck )

• The Way of Shadows
• Shadow’s Edge
• Beyond the Shadows

Brandon Sanderson – Mistborn (amazing series, sci-fi at its best)

• The Hero of Ages
• The Well of Ascension
• The Final Empire

Jim Butcher - Codex Alera (great series)

• Furies of Calderon
• Academ’s Fury
• Captain’s Fury
• Cursor’s Fury
• Princeps’ Fury
• First Lord’s Fury

David Anthony Durham -The Other Land (great continuation)

David Weber – By Heresies Distressed (a great continuation)

Brandon Sanderson - Elantris (good – less than Mistborn by far)

Malcolm Gladwell - Outliers (good – non-fiction!)

Brandon Sanderson -Warbreaker

Richard K. Morgan - The Steel Remains (mediocre – I prefer Kovacs)

Neal Stephenson – Anathem (too long and self indulgent – but OK)

John Steakley - Armor – (just mediocre semi-interesting)

Suzanne Collins – The Hunger Games (finished it – but it was an error – too teen aged girlie!)

David Weber – On Basilisk Station (could not finish it – too mediocre)

David Eddings – Guardians of the West (worst book – I could not stomach it and quit it)

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There are several papers (and authors) that are referenced again and again in the algorithmic trading literature. 1st – the ‘mother’ of most papers in algo trading:

• Robert Almgren and Neil Chriss. Optimal execution of portfolio transactions. J. Risk, 3(2):5–39, 2000.

This paper in particular is referenced by just about *every* paper on algorithmic trading. In this paper the generalized model for arrival price algorithms is related to the reader. This paper itself also does reference an earlier and oft referenced paper worth mentioning:

• Bertsimas and Lo (1998). Optimal control of liquidation costs. J. Financial Markets

The second most important paper referenced constantly is:

• Optimal Trading Strategy and Supply/Demand Dynamics Anna Obizhaeva and Jiang Wang

This paper is also fantastic, referencing the work of Almgren and Chriss and talking more about limit order books and such.

Next there are several worth getting to – listed in my preferred order:

• Bayesian Adaptive Trading with a Daily Cycle Robert Almgren? and Julian Lorenz
• Understanding the Profit and Loss Distribution of Trading Algorithms Robert Kissell 2005
• The Expanded Implementation Shortfall: “Understanding Transaction Cost Components” Robert Kissell May 2006

There are dozens more, and I would point the interested reader to these ‘less than seminal’ yet educational papers in the area of algo trading:

• Statistical properties of stock order books: empirical results and models Jean-Philippe Bouchaud, Marc M ?ezard, Marc Potters February 6, 2008
• Order Aggressiveness in Limit Order Book Markets Angelo Ranaldo* UBS Global Asset Management
• Optimal Trading in a Dynamic Market Robert Almgren? June 30, 2009
• Optimal Execution with Nonlinear Impact Functions and Trading-Enhanced Risk Robert F. Almgren? October 2001
• Optimal execution strategies in limit order books with general shape functions Aur ?elien Alfonsi?, Alexander Schied? 2007
• Algorithmic Trade Execution and Market Impact Richard Coggins†, Marcus Lim‡, Kevin Lo 2006

I have been reading, re-reading and re-reading these (and more) over and over – all great stuff for anyone interested in algo trading.

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Hyde Park Global Bets on Adaptive Models to Trade Arbitrage Strategies in Milliseconds

Because no formula is going to work all the time, Hyde Park Global develops adaptive models, using a genetic algorithm (i.e, such as mutations and crossover), which are designed to respond to changing market conditions in real time, Afshar explains. While he refers to this as machine-based learning, he points out that the machines don’t actually learn. Rather, “They recalibrate themselves within the parameters that you have identified,” Afshar says, adding that they rely on data and quotes from previous trades to recalibrate.

Sounds just like what we began doing in ~2004.  It is *very* easy to do this poorly and we put in *years* of working on #1) a process to enable us to use these techniques properly, #2) An incorporation and understanding of the state of the art technologies (multi-objective optimization, boosting/ bagging, SVMs, fuzzy rule induction, etc). #3) specific implementations of the core machine learning techniques specialized for automated trading.

My basic belief is that these patterns of machine learning will continue to drive the state of the art of extracting money from the global markets.

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I have been reading a few books that are related:

• Empirical Market Microstructure
• An Introduction to High Frequency Finance

This paper gives a pretty good overview and meaningful conclusions from the space…

Characterization of Financial Time Series

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