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2
votes
1answer
48 views

How to compute daily compounded backtest returns closer to real-world results?

I often run quick tests of trading strategies in my analytics suites by: multiplying a vector of signal (lagged, {-1,0,1}) with a time series of daily percentage returns doing a cumulative product ...
3
votes
2answers
167 views

Is linear programming important for quant?

I'm thinking about taking a course on Linear and Convex Programming, but I don't know how useful it is in the real world finance. Which areas in finance is mathematical programming used?
2
votes
1answer
227 views

Divergent or Convergent Strategies? Which is the way to go?

Consider first the simple convergent strategy to invest some amount $X$ in a game, if you win you simply take the winnings and keep playing a subsequent game. In the case of a loss, you believe in ...
1
vote
1answer
240 views

Pre-trade evaluation and risk assessment of option trading strategies (in market practice)

When a trader gets conclusion of the volatility is being underestimated (via volatility cone or some other technology), actually there are multiple ways for his trading. (Let's assume the underlying ...
5
votes
1answer
198 views

How to choose a rolling window type and size?

I'm developing a trading strategy which takes into account certain parameters (e.g. avg spread, weighted price, etc). Of course, these parameters can be calculated over different window types (i.e. ...
0
votes
1answer
498 views

Liquidity detection based strategy in HFT

This article contains the following statement. In terms of liquidity detection, traders intend to decipher whether there are large orders existing in a matching engine by sending out small ...
1
vote
4answers
394 views

Proof that the number of trades done (successfully) matters for whether or not a strategy was lucky

Me and a friend is trying to settle and argument in relation to the following quote by Nassim Nicholas Taleb: I don’t want to spend too much time on Buffett. George Soros has 2 million times more ...
-4
votes
1answer
701 views

Show that convexity of call price as a function of the strike is violated [closed]

European call options with strikes 90, 100 and 110 on the same underlying asset and with the same maturity are trading for 22.50, 18.84 and 13.97 respectively. show that the convexity of the call ...
1
vote
3answers
2k views

Appropriate method for calculating negative returns on a trading strategy?

I have a cumulative profit/loss time series below for a trading strategy, what is the appropriate way to calculate the returns in percentage for such a series? My issue is the appropriate ...
7
votes
1answer
425 views

What is the optimal strategy when there is an equal chance for gain or loss but the size of the potential gain is larger?

I'm investigating a situation where the chance for gain or loss is the same, but the amount gained is greater than the amount that is lost. For example, the gain would be about 30% of the trade ...
9
votes
1answer
863 views

What is the Sugihara Trading System?

I recently heard the term Sugihara Trading System. I guess it might be some trading strategy or a special model to predict trends in market data, but I couldn't find out anything about it. Does anyone ...
4
votes
1answer
531 views

What research is available on the performance of convertible bond arbitrage models?

The basic principles of convertible bond arbitrage have been clear at least since Thorp and Kassouf (1967). For those who are not familiar, the arbitrage entails purchasing a convertible bond and ...
8
votes
9answers
12k views

Strategy of Renaissance Technologies Medallion fund: Holy Grail or next Madoff?

Renaissance Technologies Medallion fund is one of the most successful hedge funds - ever! Yet it is very secretive. Do you have information on the strategy used that is not yet mentioned in the ...
12
votes
4answers
2k views

Is there any good research on support and resistance?

Could somebody advise me on where to find good literature on the justification or motivation for using support and resistance lines - and also lines of maximums and minimums. In finance, it is ...
26
votes
9answers
5k views

How 'High' is the frequency in HFT?

How many trades per second are we talking about? What kind of strategies are used in this time frame? Can the small guy play the game?
10
votes
2answers
2k views

Categories of systematic trading strategies?

What are the main categories of systematic trading strategies (e.g. momentum, mean reversion), as might be considered by an index or fund-of-fund analyst? Are there any common sub-strategies?
0
votes
1answer
915 views

basic stock trading strategies [closed]

What are some trading strategies for stocks (just stocks, no derivatives) using freely available online data sources?
6
votes
2answers
539 views

What quant terms to use to search for papers about “stop-hunting” trading strategies?

Are there any papers about possible trading strategies you can apply when you know where a large cluster of orders is located in the order-book? These seem to fall in the ...
15
votes
8answers
1k views

Why is there no “meta-model”?

If I design a trading model, I might want to know the model's half life. Unfortunately, it doesn't seem possible to predict alpha longevity without a meta-model of the market. Intuitively, such a ...
8
votes
1answer
394 views

How to select/construct benchmarks for black-box trading strategies?

When faced with a black box trading strategy with extensive historical data available, how would one select/construct a representative benchmark? As a trivial example, when a strategy historically ...
28
votes
6answers
3k views

What are the popular methodologies to minimize data snooping?

Are there common procedures prior or posterior backtesting to ensure that a quantitative trading strategy has real predictive power and is not just one of the thing that has worked in the past by pure ...
4
votes
1answer
2k views

Mean reverting strategies

I would like to take advantage of a volatile market by selling highs and buying lows. As we all know the RSI indicator is very bad and I want to create a superior strategy for this purpose. I have ...