The random-walk tag has no wiki summary.
3
votes
0answers
40 views
Optimal mortgage rate strategy
When buying a mortgage, you can choose to "lock in" a rate at any point within 60 days of your closing date. Once locked in, you can't revert.
This makes it a secretary problem - in the traditional ...
3
votes
0answers
72 views
Is it random walk?
I would like to ask a question about random walk. Campbell, Lo & Mackinlay defined the random walk, in the following way (RW3):
$$
cov[f(r_{t}),g(r_{t+k})]=0,\qquad k\neq0
$$
for all $f(\cdot)$ ...
1
vote
1answer
266 views
Probability of trade's exit orders being triggered in random-walk market
When placing a trade with Stop Loss and Take Profit orders in a hypothetical random market (i.e. 0.5 probability of up tick and 0.5 probability of down tick), assuming:
x is the distance in ticks of ...
4
votes
1answer
378 views
Coin Toss System
Coin Toss Runs Calculator
The expected number of runs for two consecutive heads or tails is 3. Is there an edge if we place a progressive constant size bet(limited to 3 times)for consecutive ...
7
votes
1answer
243 views
Connections between random walk and heat equation (Material for ~)
I am preparing an undergraduate lecture in quantitative finance and I am looking for material that combines the topics:
random walk and
heat equation
The material should be accessible ...
4
votes
2answers
188 views
What sort of order submission strategy would result in a random walk of trade prices?
I have written a simulation that matches buy and sell orders, keeps track of an order book and simulates trades. My first pass at order submission was to generate random orders around the bid/ask ...
2
votes
2answers
208 views
Proof showing that dollar cost averaging always worse than lump sum alternative
I am referring to the article here. In a nutshell the article says that using data based on S&P 500 index going back as far as to 1950, dollar cost averaging is performing worse than a lump sump ...
3
votes
2answers
156 views
If the distribution of returns in symmetric, why not use a coin toss, small risk & high reward?
If the distribution of returns is symmetric then why not
use a coin toss to decide whether to buy or sell
Calculate the average velocity of the market (ATR - in technical analysis)
Place a stop ...
5
votes
1answer
511 views
How to simulate correlated assets for illustrating portfolio diversification?
I have seen multiple instances where people try to explain the diversification effects of having assets with a certain level of correlation, especially in the "most diversified portfolio" literature. ...
12
votes
5answers
2k views
Proof that you cannot beat a random walk
There is much speculation to what degree financial series are random (and what kind of randomness prevails).
I want to turn the question on its head and ask:
Is there a mathematical proof that ...
14
votes
6answers
1k views
How random are financial data series?
Pseudorandom number generators are often tested using e.g. a test suite like Diehard tests or Dieharder. If one would run these tests e.g. on stock market time series or other financial data, would ...
3
votes
1answer
1k views
Mersenne twister random number generator in Java for Monte Carlo Sim.
I am using the Mersenne twister random number generator in Java for a Monte Carlo Simulation. I need a uniform distribution of values between -1 and 1. My code is below (I am importing ...
7
votes
2answers
410 views
Proving Random Walk Hypothesis in Stock Market
Given the time series for a particular stock market, what are the statistical weapons one can bring on to prove, or disprove that random walk hypothesis?
