Case Studies

DePaul University

FIN 320: Money and Banking

The Need

The Arditti Center for Risk Management is a finance lab in the Driehaus College of Business at DePaul University. The lab facilitates a curriculum grounded in research to help students bridge their academic experience with the working world.

Money & Banking is a required course for undergraduate business students majoring in finance. The course analyzes how money and banking operations from American financial entities impact the economy and the evaluation of monetary policies and goals.

Professor Lamont Black’s class was scheduled at the same time as the Federal Open Market Committee’s (FOMC’s) monthly monetary policy announcement. Professor Black wanted his students to experience the market impact of the Federal Reserve’s change on monetary policy. He felt that the market activity during the announcement would demonstrate how the market digests information and re-prices assets. Not only did he want his students to see the market impact of the FOMC’s decision, he also wanted them to experience the impact themselves by trading equity futures throughout the announcement. In short, exposing students to risk by having them trade in this environment would add to the lesson.

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The Engagement with TT

Since 2009, DePaul has been a partner school of the TT CampusConnect® program. Initially, Trading Technologies’ X_TRADER® platform was installed in the Arditti Center, where students had the opportunity to use the software to complement what they were learning in the classroom.

Professor Carl Luft, who manages the Arditti Center, referred Professor Black to Trading Technologies. Although TT’s software would not normally be used in Professor Black’s Money and Banking class, he wanted to explore how it could allow his students to experience trading during the FOMC monetary policy announcement.

To facilitate easy classroom use, Trading Technologies provided Professor Black’s students with access to the next-generation TT® platform. The web-based software requires no installation, and students can access it anywhere they have an internet connection, from virtually any device.

Trading Technologies created accounts for all 32 students in the class. They were granted access to the software during class and trained on how to enter and cancel orders as well as access their position and P/L.

All trading took place during one class session. Students had the opportunity to trade both equity futures and interest rate futures before, during and after the FOMC announcement. TT professionals offered assistance during the class by explaining what happens when the FOMC releases the policy decision, what traders look for and how students should manage their trades during the class.

Some students who were already acquainted with TT’s software through a separate class project that focused on automated trading chose to automate their strategies using ADL® (Algo Design Lab). ADL makes it easy for non-programmers to design and deploy algorithms through its intuitive pre-coded blocks. Users drag, drop and connect the blocks, creating flowcharts of their strategies that convert to well-tested code. In this manner, virtually anyone can automate a strategy without manually writing a line of code.

The students who automated their strategies with ADL created iceberg orders, which are large, single orders that have been divided into smaller lots. In this instance, the smaller orders were deployed when the last traded price violated the upper and lower limits of a Bollinger band analysis.

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The Result

By experiencing the markets first-hand, students garnered a better understanding of what it was like to make decisions in real time under real market conditions. The exercise allowed students to experience live market dynamics, such as volatility and liquidity, and demonstrated how the market processes information and re-prices itself.

Both students and faculty were struck by the realistic experience that working with the TT platform provided.

One student, Arman Hodzic, earned $33,000 in simulated trading. According to Hodzic, the experience proved more favorable than a traditional classroom approach. He explained, “It’s experiential learning. It’s way different than sitting in a class, taking notes and reading from a PowerPoint. You’re actually in front of a computer that shows you what’s going on in the market. You can greatly benefit from the teacher and technology in [the finance lab].”