Quantitative trading strategies use quantitative signals and a set of predefined systematic rules to make trading decisions. Strategies operate within parameters based on historical analysis (backtesting) and real world market studies (forward testing). Strategies may be executed manually (by a ...

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249 views

Analog - Pattern Recognition model using KNN

I'm building a pattern recognition model for my master thesis. The idea is to build a framework with some Macro variables (long/short term rates; rates differential; equity; fx; vix) in order to find ...
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2answers
545 views

Backtesting with Simulated Historical Data?

The trading strategies that are going to backtest well are the ones that pick the winners from the past. For example, if a trading strategy simply bought apple stock it would backtest extremely well. ...
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1answer
236 views

Given future price probability distribution, what is a strategy that maximizes return?

Say I know the price probability distribution, e.g., lognormal(p,s), of a stock X at a future time ...
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3answers
941 views

How to trade volatility?

I am analyzing the volatility of financial stock returns and let's say I have a pretty good model to forecast tomorrows volatility of the stock returns. So let's say for simplicity reasons I have a ...
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2answers
1k views

Calculating true value of a stock given the order-book and recent trades

I'm trying to calculate the 'true value' of a stock listed on an exchange. I have access to the limit order-book (containing all bid/ask quotes) and also all trades which have taken place (which ...
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1answer
301 views

normalized accumulation distribution

I am looking for a way to take an accumulation/distribution indicator and normalize it so I can compare a bunch of stocks with stock prices that have no relationship with each other. EDIT: This ...
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568 views

Evaluating forecasting algorithm

I am trying to evaluate a forecasting algorithm for stock price prediction. However, the performance of the algorithm may be very much tied to the trading strategy. Is there a systematic way for ...
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0answers
26 views

Major categories of tradable securities and the ETF's that track them?

I'm just starting to learn about quantitative finance and I'm overwhelmed by the amount of tradable securities out there. I'm seeing all these things like VXX, TLT, TMF, SPY, SPXL, HYG, VWEHX and so ...
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35 views

ISM PMI data - sector trend through ranking and seasonal decomposition

I have monthly data for each of the 18 sectors in the ISM PMI. Each datapoint shows the trend of a sector: growing, contracting or neutral. It also tells the strength of that trend with a number: ...
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0answers
85 views

forecasting trading costs with end of day data

I am trying to create a model that forecasts trading costs (using end of day data, so no intra day data). My trading cost (also called Implemented Shortfall (IS) is defined as such for a single stock, ...
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0answers
51 views

How to make the algo decide over a optimal selling point?

Please don't bully if its a basic question.Kinda new to the topic hence experimenting. Problems to construct trading algorithm.For the example I assume I am getting a buy signal from the DMI/ADX ...
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0answers
91 views

Method to combine trading signals to achieve higher sharpe

There are a few thread with the question of methods to combine different trading signals/strategies. But is there any method that can ensure that by combining two signals, we can achieve a better ...
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0answers
62 views

Straddle neutral strategy

What does it mean to implement a delta-neutral strategy for straddle ? A straddle consists in buying a call and a put simultaneously, at the same date, on same underlying, with same maturity and ...
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0answers
24 views

Correct term for position accumulation relative to price?

I've been looking at various accumulation algos and it appears that the greater majority are predicated on building a position largely relative to a time component or market volume for obvious ...
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1answer
154 views

quadratic programming portfolio optimisation

I am using MATLAB to do an optimisation. The QP minimisation problem is set up in the standard form shown below. The optimisation is used to calculate the weights (x vector in the equation below) of a ...
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0answers
181 views

Models for volatility estimation of high frequency data?

I have read on several news articles and research papers, "Contrary to popular belief, high frequency trading reduces volatility in stock markets rather than exacerbates it". Do you know the models ...
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0answers
69 views

robust regions in grid search

I have a strategy f that takes parameters x,y (for x,y taking values in integer ranges). I get two grids (of returns and volatility values) from computing f(xi,yi) for integer ranges x1 <= xi <= ...
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0answers
185 views

trading strategy outperforms passive strategy in absolute terms, but in returns vice versa. how could this be?

Background: I want to compare two trading strategies in term of profitability. The red one is an active trading strategy, which involves many entry and exit to a specific market. The blue one is a ...
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0answers
147 views

Calculating index arbitrage

I have a days-worth of level 2 market data. I am calculating S&P500 index arbitrage. I have a few questions about the calculation: 1) Should I be summing all the bids and asks from the stocks ...
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0answers
633 views

Using volatility cycles to switch between trend following & range bound trading? [closed]

"...a low volatility environment is usually a good environment for trend following strategies; see Jez Liberty’s state of trend following report here..." ...
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1answer
84 views

What does NPV ASSENTED after stock name mean?

For a project, I have to quantitatively implement a strategy for value investing in EURO STOXX 50. I pulled the data from Datastream. When I was checking some data plots for dividend yields and total ...
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1answer
101 views

What are some quantitative trading strategies used by high-frequency trading companies to make a killing on a market crash day on 24Aug2015?

http://blogs.barrons.com/focusonfunds/2015/08/24/high-frequency-trading-firms-just-made-a-killing/ Virtu Financial (VIRT), the high-speed trading firm that went public earlier this year, was one ...
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2answers
396 views

Orderbook Arbitrage

The order-books of trading exchanges are often hidden as so-called "Dark Pools". The measure was taken to avoid apparent market manipulation strategies executed by traders back then. Which such ...
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3answers
225 views

Research methodology of systematic strategies

Can someone please share your research methodology of systematic trading strategies? I feel like I am always using the a same data driven procedures over different underlyings and would like to get ...
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1answer
192 views

Quantitative finance mentality for success [closed]

I have a strong statistical background (particularly in Time Series analysis) and previously have spent a lot of time modelling sports, Baseball in particular. After reading "Analysis of Financial ...
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1answer
76 views

What is the logic behind this backtesting code in R

I am new to R and I have found this simple backtesting code and can you explain me what is happening here. ...
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2answers
154 views

what volatility do we calculate using GARCH model

what volatility do we calculate using GARCH model, Historical vol or Implied vol or Future Vol or Actual vol.
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841 views

Asset-or-nothing Option Valuation in the Black and Scholes model

In standard Black-Scholes Model, compute the price of an asset-or-nothing put and asset-or-nothing call options. Write down the put-call parity relation between the asset-or-nothing call and put ...
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1answer
528 views

Selecting timeframe for time series analysis

In technical analysis, we may use confluence of direction for 3 timeframes to roughly gauge bias of market now. Similarly, if we use time series forecasting methods to predict(say daily data-whether ...
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2answers
191 views

Who holds stock overnight?

I have heard from several different sources, e.g. professors, books and traders, that daytraders and quants avoid holding positions overnight and during holidays and weekends. Instead, they sell their ...
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1answer
208 views

What would be the impact of the US Credit Rating downgrade on Crude Oil Prices? [closed]

From a modeling point of view, here are my primary assumptions for Monday: a) I would expect the US$ to depreciate and crude oil to rise in the long term. b) Expect crude oil to dip in the short run ...
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0answers
38 views

Test for NonLinearity

I am doing a regression, returns of stocks(cross section of stock returns at a given time) against some fundamental factors. And look at the residuals to get a normalized view when trying to rank the ...
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0answers
37 views

Choosing an optimal dependent variable, regression/model fitting

When I select a certain target variable and model that with either linear regression or some other technique, say naive bayes, I hope to finally arrive at a model which has statistical significance, ...
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1answer
163 views

Binomial tree vs trinomial tree in pricing options

Very new to pricing models. Is there a general guideline when to use binomial tree and when trinomial tree is preferred? As far as I know, unlike binomial tree, trinomial tree only gives a range ...
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0answers
21 views

use of recurrence quantification analysis for deterministic signal identification and classification

The recurrence quantification analysis (RQA) is a method of nonlinear data analysis which quantifies the number and duration of recurrences of a dynamical system presented by its state space ...
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50 views

Calculating Asset Returns

The question pertains to a simple phenomenon. There is gold futures listed on Exchange A and Exchange B. Exchange A and Exchange B overlap times with A and B starting 8 hours later and A and B ...
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205 views

How to calculate returns of backtested strategy?

Lets say I have some strategy (long/short) backtested for certain period. Strategy has entries/exits only at the end of the day and may have overnight positions hold. Now I would like to compare ...
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0answers
58 views

Fixed Income Swap Sharpe Ratio Calculation

I have a Fixed Income based strategy based on swaps. Q1.) Given that swaps are based on a "notional" principal and no actual exchange of principal's takes place, is it fair to assume a funding cost ...
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41 views

Significance of Data

The following is a result I get from a pair trading model. I am trying to figure out the significance of the below but failing. Can someone help me out i.e. a resource or possibly an explanation on ...
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32 views

measuring the performance of round-trips on stocks

can you provide me with some ideas to assess the profitability of round-trips? That is when I buy 100 shares of IBM at 10\$ and I resell them two days later at 11\$, how can I measure the profit made? ...
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0answers
280 views

Fluid dynamics for order book depth modelling

Would someone be able to give me an idea what type of fluid dynamics I could look at for modelling the order book? My background is more signals-related maths (correlation, covariance, fourier etc). ...
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0answers
40 views

Inferring Returns From Minimal Data Points [duplicate]

Possible Duplicate: How much data is needed to validate a short-horizon trading strategy? Suppose I have daily returns for a trading strategy against one month of data. Before starting ...
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2answers
110 views

Automatic trading strategies - what are benchmarks for PL on serious backtesting?

There are plenty books and sites which offer automatic trading strategies (robots) and claim they are very profitable. On the other hand many people do not believe in such things, saying that: if ...
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1answer
85 views

conservative approach payoff table

With the conservative approach, we choose the decision which maximises minimum payoff. I was wondering which decision is chosen if 2 decisions have equal minimum payoff (which is the maximum)? ...
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1answer
2k views

Can end-to-day trading be profitable? If not, why? [closed]

Many academics argue that end-to-day trading, where you go long or short before opening and sell your security at the end of the day, is not profitable. Various explanations are given for this ...
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1answer
408 views

How to test the efficiency of Exponential Moving Averages as a trading startegy? [closed]

I would like to know how I can test the efficiency of Exponential Moving Averages when it comes to forex trading. Can i have any papers that point to the efficiency of this strategy? Thank you. :)
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1answer
495 views

Trading Strategies and Portfolio Constructions based on Cross Sectional Regression? [closed]

I often see trading strategies and portfolio construction that are based on cross-sectional regression. For example, I often see regressing some numbers against some factors. I was wondering how ...
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1answer
585 views

Target daily ROI for a market-making algorithm

I'm designing a market-making algorithm, I was wondering what a decent ROI / day would be to aim for in such a system?
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1answer
680 views

How to calculate the weight of the stocks using the linear regression?

I do a simple example with the follow three series(stocks prices): ...