Realtime market microstructure analysis: online Transaction Cost Analysis

Motivated by the practical challenge in monitoring the performance of a large number of algorithmic trading orders, this paper provides a methodology that leads to automatic discovery of the causes that lie behind a poor trading performance. It also gives theoretical foundations to a generic framework for real-time trading analysis. Academic literature provides different ways to formalize these algorithms and show how optimal they can be from a mean-variance, a stochastic control, an impulse control or a statistical learning viewpoint. This paper is agnostic about the way the algorithm has been built and provides a theoretical formalism to identify in real-time the market conditions that influenced its efficiency or inefficiency. For a given set of characteristics describing the market context, selected by a practitioner, we first show how a set of additional derived explanatory factors, called anomaly detectors, can be created for each market order. We then will present an online methodology to quantify how this extended set of factors, at any given time, predicts which of the orders are underperforming while calculating the predictive power of this explanatory factor set. Armed with this information, which we call influence analysis, we intend to empower the order monitoring user to take appropriate action on any affected orders by re-calibrating the trading algorithms working the order through new parameters, pausing their execution or taking over more direct trading control. Also we intend that use of this method in the post trade analysis of algorithms can be taken advantage of to automatically adjust their trading action.Comment: 33 pages, 12 figure

Ontology of core data mining entities

In this article, we present OntoDM-core, an ontology of core data mining entities. OntoDM-core defines themost essential datamining entities in a three-layered ontological structure comprising of a specification, an implementation and an application layer. It provides a representational framework for the description of mining structured data, and in addition provides taxonomies of datasets, data mining tasks, generalizations, data mining algorithms and constraints, based on the type of data. OntoDM-core is designed to support a wide range of applications/use cases, such as semantic annotation of data mining algorithms, datasets and results; annotation of QSAR studies in the context of drug discovery investigations; and disambiguation of terms in text mining. The ontology has been thoroughly assessed following the practices in ontology engineering, is fully interoperable with many domain resources and is easy to extend

A nonparametric empirical Bayes framework for large-scale multiple testing

We propose a flexible and identifiable version of the two-groups model, motivated by hierarchical Bayes considerations, that features an empirical null and a semiparametric mixture model for the non-null cases. We use a computationally efficient predictive recursion marginal likelihood procedure to estimate the model parameters, even the nonparametric mixing distribution. This leads to a nonparametric empirical Bayes testing procedure, which we call PRtest, based on thresholding the estimated local false discovery rates. Simulations and real-data examples demonstrate that, compared to existing approaches, PRtest's careful handling of the non-null density can give a much better fit in the tails of the mixture distribution which, in turn, can lead to more realistic conclusions.Comment: 18 pages, 4 figures, 3 table