16
votes
3answers
2k views
What is a stationary process?
How do you explain what a stationary process is? In the first place, what is meant by process, and then what does the process have to be like so it can be called stationary?
10
votes
3answers
1k views
Is there an all Java options-pricing library (preferably open source) besides jquantlib?
I am looking for an all-java implementation of black scholes, preferably open source. I found jquantlib and quantlib (C++). Any other recommendations?
The jquantlib site seems to be down.
I'd prefer ...
9
votes
1answer
663 views
Is there a popular curve fitting formula of options skew vs strike price or vs Delta?
I was trying to build a options trading/optimization system. But it often gets more inaccurate as it scans through the far from ATM options because, you know, options skews.
That is because I did ...
6
votes
5answers
982 views
What blogs or articles online should I read to get started with quantitative finance? [closed]
I want to start learning quantitative finance, what articles or blogs should I look at to start?
Also see the Related Question on Quantitative Finance Books
12
votes
4answers
1k 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!
11
votes
2answers
893 views
How to update an exponential moving average with missing values?
Say you have an Exponential Moving Average being continuously updated over a time series using 1-second-long time periods. What should happen if there is no value for the next second, e.g. there were ...
11
votes
6answers
1k views
Why does the VIX index have *any* correlation to the market?
It appears that the log 'returns' of the VIX index have a (negative) correlation to the log 'returns' of e.g. the S&P 500 index. The r-squared is on the order of 0.7. I thought VIX was supposed to ...
9
votes
3answers
2k 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 ...
8
votes
5answers
1k views
What exactly is meant by “microstructure noise”?
I see that term tossed around a lot, in articles relating to HFT, and ultra high frequency data.
It says at higher frequencies, smaller intervals, microstructure noise is very dominant.
What is ...
8
votes
7answers
2k views
Is “eoddata” a good data source?
Not sure if this is a relevant question for site, but I am looking to move to www.eoddata.com as my data source.
If anyone has used it, can you tell me how the data quality is ?
I am currently ...
7
votes
2answers
641 views
How to calculate the most realistic historical option prices with additional publicly available parameters
This is a follow up question of this one.
My aim is to create the most realistic historical option prices possible with publicly available data. I want to do this for backtesting purposes.
The ...
7
votes
4answers
780 views
Library to solve optimization problems
I'm working with C# and I start being bored writing optimization algorithm. Do you know of any free library containing this sort of algorithms.
In particular I'm cutrently working with Semidefit ...
10
votes
3answers
1k views
How are limit orders selected from the order book?
I'm sure there is a simple answer to this but I haven't had any luck with searches. I'm just wondering when someone places a market order which order(s) from the limit order book are selected to fill ...
8
votes
2answers
477 views
When should you build your own equity risk model?
Commercial risk models (e.g., Barra, Axioma, Barclays, Northfield) have evolved to a very high level of sophistication. However, all of these models attempt to solve a very broad set of problems. ...
8
votes
3answers
3k views
What is Ito's lemma used for in quantitative finance?
Further to my question asked here: prior post
and which left some points unanswered, I have reformulated the question as follows:
What is Ito's lemma used for in quantitative finance? and when is it ...
6
votes
5answers
4k views
How to calculate historical intraday volatility?
Sorry for what must be a beginner question, but when I went to write code I realized I didn't understand exactly how historical volatility, or statistical volatility, is defined. Wikipedia tells me ...
5
votes
1answer
209 views
How to value a floor when a loan is callable?
Certain bank loans pay a spread above a floating-rate interest rate (typically LIBOR) subject to a floor. I would like to find the value of this floor to the investor. Assume for this example that ...
4
votes
1answer
394 views
Trade execution in HFT - role of quants
What is the role of quants in trade execution in high frequency trading? AFAIR in "normal" trading trade execution is considered a very mundane task. What role can quantitative modelling play in trade ...
7
votes
4answers
695 views
How to interpolate gaps in a time series using closely related time series?
I am trying to construct a daily time series of prices and returns for some large universe of securities. However, all I have available are a monthly time series of the prices/returns (as well as ...
3
votes
3answers
914 views
Why does the adjusted closing price take into account dividends?
I'm trying to get an intuition as to why the adjusted closing price includes a dividend adjustment:
\begin{equation}
1 - \frac{dividend}{close}
\end{equation}
I understand why the adjusted closing ...
3
votes
3answers
407 views
What are the limits of bond portfolio immunization against interest rate changes?
I'm currently reading through an article on bond portfolio immunization against changes in the interest rate.
I learned that the immunization can be done against instant changes in interest rate ...
7
votes
3answers
267 views
How does Cornish-Fisher VaR (aka modified VaR) scale with time?
I am thinking about the time-scaling of Cornish-Fisher VaR (see e.g. page 130 here for the formula).
It involves the skewness and the excess-kurtosis of returns. The formula is clear and well ...
2
votes
1answer
194 views
What are $d_1$ and $d_2$ for Laplace?
What are the formulae for d1 & d2 using a Laplace distribution?
2
votes
1answer
98 views
Can determinant of liquidity risk be used as a dimension or measure of liquidity risk
Can I take liquidity risk determinant as a dimension of it in order to examine the impact of liquidity risk on performance of banks? For example in a literature, Tangibility i.e., ratio of fixed ...
2
votes
1answer
191 views
What is the difference between these two optimization procedures?
In this portfolio optimization utility (and others), mean return, standard deviation and correlation among assets are required inputs.
http://finance.wharton.upenn.edu/~stambaugh/portopt.html
At ...
2
votes
0answers
81 views
Good Environment, Social, and Governance Indicators to correlate with financial performance of PE
I am trying to see if there is a correlation between the Environment, Social, and Governance (ESG) performance and the financial performance of Private Equity (PE) funds.
Are there any suggestions ...
1
vote
1answer
358 views
Two prices pass the cointegration test but there is a trend. How to check stationarity?
Below is a spread built with two ETFs that pass the cointegration test i.e. Adjusted Dickey Fuller, adfTest(type="nc") in R's fUnitRoots with a p-value < 0.01.
The red line is the trendline.
What ...
1
vote
1answer
182 views
Reading recommendation on using statistical analysis in online fraud prevention [closed]
Can you please recommend good reads on statistical analysis related to online fraud detection and prevention of account abuse?
31
votes
10answers
10k views
Switching from C++ to R - limitations/applications
I've only recently begun exploring and learning R (especially since Dirk recommended RStudio and a lot of people in here speak highly of R). I'm rather C(++) oriented, so it got me thinking - what are ...
10
votes
5answers
2k views
References for developing an automated trading system?
I am looking for references on the architecture of automated trading systems and the trading algorithms behind them. I am more interested in system development than analysis. A couple of books I ...
23
votes
6answers
2k 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 ...
13
votes
4answers
2k views
What C++ math libraries are typically used by quants?
Before you mark question as off-topic, please read it - it is, actually, quant-related.
Basically, I'm working on an app that spits out a lot of C++ math. When it comes to simple things like ...
29
votes
5answers
1k views
Lévy alpha-stable distribution and modelling of stock prices.
Since Mandelbrot, Fama and others have performed seminal work on the topic, it has been suspected that stock price fluctuations can be more appropriately modeled using Lévy alpha-stable distrbutions ...
19
votes
6answers
2k 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 ...
18
votes
5answers
3k views
What is a good broker for HFT?
Currently I trade trough IB. I run my HFT strategies (100 roundtrips per hour) but I think that latency is killing me and my profits are shrinking. I need the fastest possible brokers out there which ...
16
votes
5answers
2k views
How to identify technical analysis chart patterns algorithmically?
I'm working on a small application that will provide some charts and graphs to be used for technical analysis. I'm new to TA but I'm wondering if there is a way to algorithmically identify the ...
15
votes
6answers
5k views
What are some useful approximations to the Black-Scholes formula?
Let the Black-Scholes formula be defined as the function $f(S, X, T, r, v)$.
I'm curious about functions that are computationally simpler than the Black-Scholes that yields results that approximate ...
12
votes
3answers
2k views
What are the best sources for equity quantitative research?
What are the best sources of quantitative finance research in equities?
I will list a couple and note an asterisk if the research is available by request (i.e. non-clients) or online:
BAC-Merrill ...
15
votes
2answers
1k views
How to forecast volatility using high-frequency data?
There is a large literature covering volatility forecasts with high-frequency tick data. Much of this has surrounded the concept of "realized volatility", such as:
"Realized Volatility and ...
14
votes
1answer
669 views
Portfolio optimization with monte carlo sampling from predictive distribution
Let's say we have a predictive distribution of expected returns for N assets. The distribution is not normal. We can interpret the dispersion in the distribution as reflection of our uncertainty (or ...
13
votes
5answers
3k views
Python library for Portfolio Optimization
Does anyone know of a python library/source that is able to calculate the traditional mean-variance portfolio? To press my luck, any resources where the library/source also contains functions such as ...
18
votes
4answers
2k views
Why do high frequency traders use rapidly cancelled limit orders?
In reading about the various practices and strategies of high frequency traders, one of the most mysterious to me is "fleeting orders," or orders that are cancelled almost immediately after they are ...
14
votes
2answers
793 views
From a high frequency point of view, with a price prediction and assuming infinite leverage, how do you determine optimal trade size?
I have read about something like Kelly criterion for long term expectation maximization assuming a fixed starting bankroll. But if one can assume unlimited leverage, and one has a signal for a price ...
12
votes
6answers
2k views
What is the best data structure/implementation for representing a time series?
I was wondering what is best practice for representing elements in a time series, especially with large amounts of data. The focus/context is in a back testing engine and comparing multiple series.
...
12
votes
7answers
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 ...
10
votes
2answers
551 views
Why is the ratio of Hi-Low range to Open-Close range close to 2?
I tried it in several symbols and timeframes with the same result:
$$\frac {mean(HIGH-LOW)}{mean(|CLOSE-OPEN|)}$$
...
8
votes
3answers
374 views
How to test for and how to simulate price rise/fall asymmetry in the stock market
One of the stylized facts of financial time series seems to be a fundamental asymmetry between smooth upward movements over longer periods of time followed by abrupt declines over relatively shorter ...
14
votes
7answers
4k 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 ...
14
votes
3answers
2k views
Can the concept of entropy be applied to financial time series?
I am not familiar with the concept of entropy for time series. I am looking for good reference papers and examples of use.
12
votes
6answers
5k views
Is Scala used in trading systems
I'm curious about high performance computing and consider algo/program trading as an interesting source of information about what are performant technologies that are used to trade the markets.
Is ...
