Module 5 of 5 in Derivatives and advanced market concepts
Market microstructure and quantitative methods
How orders interact at the level of the order book, algorithmic trading, and the basics of quantitative analysis.
3 lessons in this module. Progress is saved in your browser as you go.
This module looks under the bonnet of modern markets: how orders interact in the order book, what algorithmic and high-frequency traders do, and how quantitative analysts build and test models. It builds on the backtesting lessons in the technical analysis path.
By the end of this module you should be able to
- Explain order book dynamics, market impact and the role of market makers and algorithms.
- Describe the basic workflow of quantitative analysis and its main pitfalls.
Lessons in order
Module test
10 questions, chosen at random from a bank of 30 questions and balanced across this module's learning goals and difficulty levels. Every question comes with an explanation. You need 80% to pass, and you can retake it as often as you like with a fresh set of questions.
This module builds on
- Liquidity and slippage in derivatives: This lesson looks in detail at the liquidity and slippage introduced there.
- Market orders and limit orders: Microstructure builds on how market and limit orders work.
- Overfitting, sample size and out-of-sample testing: Overfitting is the central danger in quantitative work.
- Correlation and causation: Quantitative models find correlations that may not be causes.