Description: We will use case studies taken from the foreign exchange and fixed income markets to focus on the details of a variety of practical quantitative methods that can be used in these and other capital markets for data analysis, forecasting, risk management and trading. The course will combine a strongly empirical and data-driven approach to these markets along with mathematical and statistical methods and ideas from the foundations of modern finance theory. We will start with very basic ideas and will progress into more sophisticated modeling techniques; a familiarity with linear algebra and basic multivariate statistics will be useful. After an overview of how foreign exchange and fixed income markets function, we will use techniques of exploratory data analysis to become familiar with the statistical time series data sets that we will be studying. Using the classic themes of value, momentum and carry in these markets as "theoretical laboratories", we will explore methods for modeling return and risk forecasts. Also within the context of these classic themes we will study portfolio construction and trading, leading to some practical considerations such as the capacity of a strategy. In addition to problem sets (for which it would be helpful to have some facility with Matlab), part of participating in the course will be to work on one team project in each of the two halves of the semester that explore the course material in more detail.
Course #: 15.973
Professor(s) who recently taught this course:
Mark Mueller