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IOM301 Computer-based Trading in Financial Markets

Your goal is to analyze the accompanying financial dataset posted on Learning Mall, to implement and develop trading strategies, to backtest these, and to consider the risk profile of the strategies given the backtest. On Learning Mall, you will also find trading costs, the interest rate, and rules for the backtest. You have the following tasks:

Implement three simple strategies:

Select and implement at least one more sophisticated profit-seeking strategy.

For example, pairs trading, momentum trading (e.g. recently successful stocks), technical analysis, risk-return trading (e.g. pick high-volatility stocks), or machine learning.

The final deliverable is a report, with the backtesting code included as an appendix.

You should be aiming to produce a report of at least 1000 but no more than 1500 words. Diagrams, tables, appendices, code, and references are not included in the word count. Theexpected backtesting language is Python.

Please structure your report as follows (percentages reflect recommended distribution of word count):

1. Data analysis – Explore the data quantitatively to decide on a strategy. Compute and highlight important indicators. (30%)
2. Algorithm selection and presentation – Select an algorithm and justify your choice. (10%)
3. Backtesting and comparison of model results – Show how you set up your backtest and the results, including performance and risk indicators. (30%, includes report section and code)
4. Assessment of model risks – Describe what assumptions drive the model, and identify potential conditions (risks) which could lead to reduced performance if this model were to be deployed for trading. (30%)
5. References –Harvard style. (not included in word count)
6. Appendix – Backtesting Code to be pasted as plain text with appropriate indentation. A monospaced font is recommended.

You are expected to use concepts from lectures, the module literature, and from other materials posted on Learning Mall.

Hand-in requirements:

• An electronic version the report to be uploaded to Learning Mall no later than 23:59 of May 8 th , 2025.
•  The accepted file format is a single PDF file, with a file no greater than 5MB in size.
• The uploaded file name should be CWIOM301[Surname][Firstname].pdf without the brackets, for example CWIOM301SmithJohn.pdf
• Please use the coursework cover sheet or template posted on Learning Mall.
• Make sure that you appropriately cite any additional material used for your analysis.
• The use of generative AI is not permitted for content that appears in the report.

The goal of the assignment:

The goal is not to find the most profitable strategy. Marks will be awarded for an interesting, rigorous, and credible report. This encompasses the description of the entire process of model development and testing, as well as how the results are presented in the report.

Penalties: