TRADING LAB

The Trading Lab Certificate, delivered in partnership with Intesa Sanpaolo, is delivered primarily in Italian. Its objective is to reduce the gap between theory and practice in financial economics through four Decision Cases and intensive simulation-based activities. Particular emphasis is placed on market microstructure, liquidity risk, tender-offer evaluation and the execution of large orders. Technical terminology and part of the teaching materials are in English, also in preparation for international competitions.

General knowledge of financial markets and basic familiarity with Excel. Previous programming experience is not required. The ability to consult technical materials in English is useful.

By the end of the course, students will be able to: 1. understand order-driven markets and the roles of dealers, brokers, arbitrageurs, institutional investors and retail investors; 2. interpret the order book, bid-ask spread, market depth, volatility and the main liquidity indicators; 3. assess the profitability of private tenders, competitive auctions and winner-take-all tenders and decide whether to accept, reject or submit a bid or offer; 4. plan the execution and unwinding of large positions using market orders, limit orders and marketable limit orders; 5. identify and manage liquidity risk, execution risk, market impact, market risk and position limits; 6. distinguish trading associated with an institutional order from speculative trading and front-running; 7. develop strategies involving commodities, futures and options and turn basic arbitrage or market-making strategies into VBA/Python algorithms; 8. critically assess results and explain the decisions made during simulations and competitions.

The course uses the Rotman Interactive Trader (RIT) platform and Excel applications linked to real-time data to analyse price formation, liquidity, order execution and risk management. The programme is organised around four Decision Cases: Market Microstructure and Liquidity Risk, Commodity and Energy Trading, Options Trading and Hedging, and Algorithmic Trading. Instruction is concentrated in the first two weeks: each four-hour meeting introduces two cases, normally for approximately two hours each. The final four weeks are devoted to application: one case per week, normally with approximately one hour of guided practice and approximately three hours of competition, including multiple heats, short strategy-review intervals and a final debrief. The distinguishing focus of the Trading Lab Certificate is the Liquidity Risk Decision Case, developed from the learning content of the Intesa Sanpaolo Liquidity Risk Case. Students operate in equity markets with different levels of spread, volatility and liquidity and receive large institutional offers: private tenders, competitive auctions and winner-take-all tenders. They must rapidly estimate profitability, decide whether to accept or reject the offer and, if it is accepted, close out the position while controlling market impact, execution risk and liquidity risk. The case also addresses the distinction between trades required to execute a tender, speculative activity and front-running. The Commodities Capstone Decision Case is an individual case involving crude oil, refined products and futures contracts. Students interpret news and EIA inventory statistics, produce price forecasts and assess arbitrage opportunities between spot and futures markets, across different locations and between different products. The case also involves decisions concerning the use of storage facilities, pipelines and refineries. The Options Case addresses arbitrage relationships, delta-neutral strategies, hedging and volatility. The Algorithmic Trading Case introduces real-time data, arbitrage, market making, VBA/Python algorithms, testing and risk controls.

Rotman School of Management, University of Toronto, Release Files and teaching materials made available under the applicable terms of use: - Rotman European Trading Competition 2018, Case Package: Intesa Sanpaolo Liquidity Risk Case; - Market Microstructure 1 (Order-Driven Markets), Market Microstructure 2 (Liquidity), Market Microstructure 3 (Alternative Trading Venues); - RIT Case Brief - COM5 - Commodities Capstone; - RIT2 Trader Support - COM5 - Commodities Capstone, Excel Support Sheet Template; - Options 1 (Puts & Calls), Options 2 (Hedging), Options 3/4 (Trading Volatility); - Algorithmic Trading 1 (Arbitrage) and Algorithmic Trading 2 (Market Making); - RIT Real-Time Data and RIT VBA Introduction; - Case Description, Performance Evaluation Tool, instructor-prepared Excel models and supplementary notes. Microsoft, Visual Basic Developer Center: selected lessons and tutorials indicated by the instructor.

The course adopts an experiential learning approach and is delivered primarily in Italian, with technical terminology and materials also in English. The first two meetings combine short lectures, case briefings, platform demonstrations, Excel model building and guided exercises. The final four meetings are simulation and competition laboratories. Activities include order-book analysis, tender-offer evaluation, practice sessions, multiple-heat competitions, strategy reviews and structured debriefs. Videos and other digital materials may be used when they support the learning objectives.

Assessment comprises four competitions, one for each Decision Case. In Weeks 3, 4, 5, 6, each meeting normally includes approximately one hour of guided practice and approximately three hours of competition. Practice sessions are primarily formative. Assessment considers economic performance, consistency across heats, compliance with position and risk limits, model quality, strategic coherence and the ability to explain decisions. In the Liquidity Risk Case, the assessment also considers tender-offer valuation, acceptance or rejection decisions, the quality of the unwinding strategy, market-impact management, appropriate use of order types, and the distinction between execution, speculation and front-running. P&L is not considered in isolation from risk discipline and the quality of the decision-making process.

A final project may be assigned to students who demonstrate strong analytical ability in market microstructure, liquidity, large-order execution, market impact or algorithmic trading. At the end of the course, students with the strongest overall results may be considered for the preparation and selection process for the LUISS Team participating in the Rotman International Trading Competition. Selection will take into account competition results, quantitative and programming skills, risk discipline, reliability, teamwork and the ability to operate and communicate in English. Completion of the Certificate does not automatically imply selection for the Team.