FINT B337F (Autumn 2022) Assignment (Group Project)

Weighting: 60% of final course score

In this group project, you are required to devise an algorithm to trade a single stock that can demonstrate an outperformance versus its relevant market index over a defined period of time and aim to deliver similar sustainable results in the future. Your project will be divided into three stages with a total mark of 60:

Stage 1: Group formation (5 marks)

Deadline: Oct 8, 2022

Form a group of 4 students1 in your tutorial class and elect a group leader2 responsible for coordinating meetings and future communications among group members. By Oct 8, the group leader should submit the group information to the OLE with all group member names, student IDs and their abilities in investment knowledge, programming proficiency, and writing skill (rated as Good / Fair / Poor).

 Stage 2: Implementation and Report (35 marks)

Deadline: Dec 7, 2022 (Wednesday 11:59PM)

Submit a complete project report with the following topics. Responsible person for each of the topics should be identified and stated.

Market Microstructure Analysis: (10 marks)

l Stocks analysed

l Stock chosen

l Opportunity (Supply/Demand imbalance) identified

l Opportunity explained (why it exists)

Design: (5 marks)

l Strategies defined

l Expected outperformance vs market index over a period of time

l Expected maximum underperformance (peak to trough) at any point in time

l Paper portfolio size (in $ terms) assumed

l Trading costs assumptions (in % terms)

l Market impact (implementation shortfalls) assumptions (in % terms)

l Turnover assumptions (on an annual basis in relation to portfolio size)

Implementation: (10 marks)

l Source code

l Types of data used

l Period of data used

l In sample (training)/out of sample (testing) period chosen

Risk Management: (5 marks)

 l Risk management policies

l Possible human interventions

Evaluation: (5 marks)

l In sample vs out of sample results

l Turnover assumed vs incurred

l Maximum underperformance assumed vs incurred

l Risk identified and proposed fine-tuning

 1 New members may be assigned to the groups with less than 4 students. Some groups may be split up due to class size. 2 Bonus will be awarded to group leaders.

 Stage 3: Presentation (20 marks):

Deadline: Dec 10, 2022

Live Presentation: (10 marks)

Every group will present the project in English on Dec 10 (Saturday) in the tutorial class. Note that the PowerPoint file should be uploaded to the OLE beforehand and every group member must take part in the presentation.

Live Q&A: (10 marks)

A Q&A session will be conducted after the group presentation. Individual group member(s) will be selected to answer the questions from your lecturer and tutor.