7
votes
3answers
403 views

Parameters for pricing option on EDF

Ladies and Gents, Im writing a quick routine to calculate implied vols for options on EUR$ futures with Bloomberg data. My question concerns the part where I have all my inputs and am ready to pass ...
7
votes
3answers
381 views

Understanding CDOs

I watched every documentary on the financial crisis and CDOs, tried to understand Wikipedia etc.. but still not getting the full picture as examples seem to be limited (or complicated). Say ...
8
votes
1answer
731 views

Back office processing for FX trades

Can someone provide (or point me to) a summary of back office processing nuances specific to FX trading? For example, I know that there are several FX-specific risks that must be managed. They include ...
15
votes
5answers
3k views

Should Sharpe ratio be computed using log returns or relative returns?

I am trying to reconcile some research with some published values of 'Sharpe ratio', and would like to know the 'standard' method for computing the same: Based on daily returns? Monthly? Weekly? ...
12
votes
2answers
697 views

Effective Euro-USD (EURUSD) Exchange Rate Prior to Euro's Existence

Motivation: I am running a quantitative analysis that requires long-term, exchange rate data. Problem: Does anyone have methods for dealing with the EURUSD exchange rate prior to the Euro's ...
5
votes
2answers
338 views

Is it common to use multiple brokers for risk reduction?

Would it be considered appropriate risk-management or overkill to utilize multiple brokers to manage a given trading strategy? A couple specifics: I'm interested in what a reasonably-sized hedge ...
11
votes
2answers
812 views

Quantitative Derivatives Trading vs. Time

Most quantitative investment strategies focus on the changing prices of a commodity or equity over time. Derivatives, however, make this more complicated. How can I apply quantitative strategies to ...
6
votes
2answers
2k views

Quantmod: what's the difference between ROC(Cl(SPY)) and ClCl(SPY)

I feel like I'm missing something fundamental here, but I can't shake the feeling that these two series should be equivalent. /edit: there is also dailyReturn(Cl(SPY)). I've seen all 3 of these ...
10
votes
1answer
1k views

What are the advantages / disadvantages of the ANTICOR algorithm?

The algorithm is introduced in the paper, Can We Learn to Beat the Best Stock. The obvious advantage is superior risk-adjusted returns (if you can actually achieve them). Transaction costs and ...
6
votes
3answers
10k views

How do I calculate the delta of a convertible bond?

How can I find the delta of a convertible bond to be used for hedging?
15
votes
3answers
2k views

How to incorporate technical indicators into neural networks?

I plan to develop a neural network to trade commodities futures, but while messing around with some code, a question came up. If I understand correctly, people use various technical indicators with ...
5
votes
4answers
4k views

When should we use SWIFT versus FIX?

I've read documents that claim that SWIFT and FIX are not competing protocols for financial transactions and messaging. And yet, I have not come across a clear articulation of when to use SWIFT versus ...
10
votes
3answers
4k views

Total Return measurement paradox w/ Adjusted Close Prices

Using total return calculations is critical in developing security selection models. The standard way to measure total return is to develop a series of price-adjusted data. Investopedia describes the ...
13
votes
3answers
5k views

Free market data (delayed or snapshot)

I know there are similar questions but I don't think there are any identical ones. Basically, I'm looking for one of these two things. Delayed market data feed. A tick by tick feed, but delayed by ...
34
votes
6answers
15k views

How are correlation and cointegration related?

In what ways (and under what circumstances) are correlation and cointegration related, if at all? One difference is that one usually thinks of correlation in terms of returns and cointegration in ...
6
votes
3answers
318 views

Maximum friction-free trades

I have a trading system I would like to test for the S&P 500, or another very similar instrument. I'm looking to make approximately 10-15 trades per month. I know if you have a Vanguard account, ...
10
votes
2answers
3k views

Equity Risk Model Using PCA

I'm trying to build a simple risk model for stocks using PCA. I've noticed that when my dimensions are larger than the number of observations (for example 1000 stocks but only 250 days of returns), ...
11
votes
2answers
699 views

When is the LIBOR market model Markovian?

The question is inspired by a short passage on the LMM in Mark Joshi's book. The LMM cannot be truly Markovian in the underlying Brownian motions due to the presence of state-dependent drifts. ...
12
votes
2answers
1k views

Simulating Returns

I'll start this off with a rather broad question: I am trying to simulate returns of a large number of assets within a portfolio of different classes - equity and fixed income in a first step, say 100 ...
4
votes
3answers
13k views

Trade matching versus affirmation

I'm looking for a clearly articulated description of the difference between trade matching (e.g. Omgeo's CTM) and trade affirmation (e.g. Omgeo's Oasys). From what I understand, they both involve ...
1
vote
1answer
315 views

British hedge/mutual funds performance comparison website [closed]

Imagine a British investor with $10-100k in her pocket. She wants to see the previous performance of various British and overseas funds to choose the one to invest. And she wants to filter out the ...
2
votes
1answer
503 views

How does currency valuation depend on the cash reserve ratio for a country?

Currency valuation (with respect to other currencies) is an important parameter in finance, but how is it related to the cash reserve ratio?
5
votes
1answer
246 views

Multiple comparison problems

I recently read a blog entry where some statistics were generated for a common technical analysis indicator. Below is the link. My question shows up close to the bottom under the name bill_080, in ...
18
votes
8answers
8k views

How are cryptography and speech recognition technology applied to forecasting financial markets?

One of the answers to my previous question regarding the strategy of Renaissance Technologies, there was a reference to The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly ...
10
votes
9answers
21k 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 ...
22
votes
6answers
3k views

Most successful investors using academic-based framework?

What are the most famous/best performing absolute-return funds employing approaches based on mainstream finance theory (i.e., theory presented in Journal of Finance, AER, Econometrica, using typically ...
19
votes
3answers
1k views

How can an ETF outperform its benchmark index?

Deutsche Bank’s ETF platform, db X-trackers, provides a rather remarkable ETF tracking Euro Stoxx 50 (which is the most widely used regional blue-chip index in Europe). What makes it remarkable is ...
12
votes
4answers
2k views

Are two identical time series cointegrated?

I did cointegration test on two identical time series, and the result shows that they are not cointegrated, but intuitively, I think they are. Can anyone share some thoughts on this? Thanks!
4
votes
3answers
2k views

Mean reverting Indicator

I'm looking for an indicator which tells me if it's a good time to use mean reverting type quantitative trading strategies. In order to do so I look at the market (the few hundred stocks I trade) and ...
9
votes
1answer
1k views

Forward Adjusting Stock Prices?

How should one correctly forward adjust historical prices given a time series of Open, High, Low, Close, Return? Suppose that the data series is given below ('1' is the oldest interval; '5' is the ...
14
votes
6answers
3k views

Formal proof for risk-neutral pricing formula

As you know, the key equation of risk neutral pricing is the following: $\exp^{-rt} S_t = E_Q[\exp^{-rT} S_T | \mathcal{F}_t]$ That is, discounted prices are Q-martingales. It makes real-sense for ...
8
votes
4answers
1k views

What .NET library can I use to solve optimization problems?

I'm working with C# and I start being bored writing optimization algorithm. Do you know any free library containing this sort of algorithms? In particular I'm currently working with Semidefit ...
7
votes
1answer
566 views

How do equivalent martingale measures arise in pricing?

I'm studying for an exam in financial models and came across this question: "An agent with $C^2$ strictly increasing concave utility $U$ has wealth $w_0$ at time 0, and wishes to invest his wealth in ...
1
vote
2answers
1k views

How do I calculate weighted mean with negative weights?

I need to display in my system the amount of stocks that I own and the average price it took me to buy them. I am having a problem doing that when I include the selling. Lets say I bought 4 stocks ...
8
votes
2answers
1k views

How does return-based analysis calculate expected return of a trading system?

Suppose you have a trading system that is never flat, but either long or short the market. You have four years of performance. During that period, your system changed its position 10 times. So you ...
2
votes
0answers
146 views

Keynesian Multiplier [closed]

I am taking a degree in macro economics, and am at a juncture where knowledge about the Keynesian Multiplier is imperative. Though I've been at the lectures, read the literature and scoured the web, I ...
9
votes
2answers
409 views

How to determine if one player moved a price

I'm trying to understand what caused certain price movements (aren't we all!) in per-minute data for major NYSE stocks. In particular, I'd like to determine whether a given price movement of X% in ...
22
votes
9answers
5k views

How good is managed code for algo trading?

I am currently working in a firm that does algo trading. We do all of our stuff in Java. And we do make money out of it. We have debates all the time whether we would have made more money with native ...
26
votes
11answers
4k views

Separating the wheat from the chaff: What quant methods separate skillful managers from lucky ones?

Fund managers are acting in a highly stochastic environment. What methods do you know to systematically separate skillful fund managers from those that were just lucky? Every idea, reference, paper ...
7
votes
3answers
352 views

What is the effect of quant finance on global markets?

Attempting to get a high level understanding of the role that quantitative finance plays in the financial global markets. Open to any suggestion on how to do this, but figure a starting point might be ...
50
votes
7answers
19k views

Efficiently storing real-time intraday data in an application agnostic way

What would be the best approach to handle real-time intraday data storage? For personal research I've always imported from flat files only into memory (historical EOD), so I don't have much ...
21
votes
6answers
10k views

What type of investor is willing to be short gamma?

As far as I understand, most investors are willing to buy options (puts and calls) in order to limit their exposure to the market in case it moves against them. This is due to the fact that they are ...
24
votes
9answers
11k views

Any known bugs with Yahoo Finance adjusted close data ?

Yahoo Finance allows you to download tables of their daily historical stock price data. The data includes an adjusted closing price that I thought I might use to calculate daily log returns as a ...
8
votes
2answers
707 views

FX Tick Data question

Anyone can tell me what the first column and the last column in this FX tick dataset mean? The first seems like some kind of ID, and what D in the last column mean? 368412956 AUD/CAD 12/30/2007 ...
2
votes
0answers
102 views

How to calculate the Metropolitan Transportation Authority of New York's market capitalization or fair market value? [closed]

ok, so I can't post more than 1 link since I'm a noobie noob, and in the course of correcting this, Stack managed to delete my post. so here's the more abbreviated, slightly irritated author version… ...
24
votes
3answers
6k views

What types of neural networks are most appropriate for trading?

What types of neural networks are most appropriate for forecasting returns? Can neural networks be the basis for a high-frequency trading strategy? Types of neural networks include: Support Vector ...
6
votes
1answer
142 views

Availability of machine-readable OCC Infomemos?

Does anyone know of a source of machine-readable (XML,etc) OCC Infomemos? The PDF files available below contain all the information I want, but are a pain to parse. ...
7
votes
1answer
746 views

How to annualize Expected Shortfall?

I have a time series with monthly data from which I compute the expected shortfall empirically, following the classical definition which can be found, for example, in wikipedia's definition. That is, ...
9
votes
6answers
3k views

Vanna - any practical uses for risk or pnl attribution purposes?

What is the practical use for Vanna in trading? How can it be used for a PnL attribution?
2
votes
2answers
1k views

The Fair Value of Paying in Currency X for Goods Bought in Currency Y

Me and my friends are from Europe, we went to US. At the end of the trip they bought an item worth $USD 100$, but because they were short of money, so I paid for the item first with my own $USD 100$. ...

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