The author is a CS professor at SUNY, Stony Brook. This book recounts his experience of building a mathematical system to bet on the play outcomes of what is considered the fastest ball game in the world, “Jai alai”. In the English vernacular this is sometimes spelled as it sounds,that is, “hi-li”. The book recounts the history of the game and how it made to US from Spain and France. However the focus of the book is on using mathematical modeling and computers to analyze the game and design a betting system.

The book broadly deals with two strategies, “mean reversion” and “momentum”.These strategies cover six chapters of the book, out of which four of them are on mean reversion and two of them are on momentum strategies. Besides these six chapter, there is one chapter on backtesting strategies and there is another on risk management. Given the importance of backtesting in any strategy, the first chapter starts off with some of the pitfalls of backtesting.

Jai alai – the fastest sport in the world [youtube https://www.youtube.com/watch?v=Bo4L83VQjPM?rel=0]

The following is a deck that I have prepared with some of the main points from the various sections of the book. [slideshare id=29410907&style=margin-bottom: 5px; border-top: #ccc 1px solid; height: 329px; border-right: #ccc 1px solid; width: 460px; border-bottom: #ccc 0px solid; border-left: #ccc 1px solid&sc=no] The above deck in pdf format: Trading and Exchanges - Summary Points Takeaway : This book was published in 2003. In the last 10 years, US markets have changed dramatically and so have other markets all over the world.

Key points of the talk : Who’s doing the work? Financial economists – Develop Equilibrium models, inventory control models, asymmetric information models. Some strategic equilibrium in the background High Frequency Econometricians – Less concerned with issues about strategic equilibrium. Working on predicting realized volatility. When you hear the word, “ Microstructure noise”, you can be reasonably certain that it is a HFT econometrician Mathematicians – NYU Algo trading conference had about 300 mathematicians who had a fair enough IT background.