All Questions
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 ...
11
votes
4answers
2k views
Implementing data-structures in a Limit order book
I'm working on implementing a 'LOB' and I'm being very careful about choosing my data-structures so as to maximize performance.
Using F# as an example, I need to consider a List versus Array for ...
15
votes
3answers
2k views
Main backtesting & trading solutions: QuantFactory, Deltix, etc.
What are the most used/mature/promising commercial solutions today which handle backtesting/ automated trading needs?
I'm talking about vertical product suites like QuantFactory or Deltix which ...
13
votes
9answers
3k views
Which brokers offer a .NET stock trading API?
I'm trying to make up my mind and choose a broker, however much of my choice depends on the trading API offered.
I'm definitely not interested in FIX solutions and I'd very much like a .NET ...
10
votes
2answers
586 views
How to forecast expected volatility from high-frequency equity panel data?
I'm wading through the vast sea of literature on realized volatility estimation and expected volatility forecasting (see, e.g. Realized Volatility by Andersen and Benzoni, which cites 120 other ...
17
votes
2answers
706 views
Tools in R for estimating time-varying copulas?
Are there libraries in R for estimating time-varying joint distributions via copulas?
Hedibert Lopes has an excellent paper on the topic here. I know there is an existing packaged called copula but ...
13
votes
2answers
564 views
How do you distinguish “significant” moves from noise?
How do you distinguish between losses that are within the normal range for day-to-day shifts and situations with a real potential for loss? The specific application I have in mind is pattern ...
6
votes
7answers
6k 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 ...
13
votes
1answer
531 views
Diversification, Rebalancing and Different Means
I have found many financial authors making generalizations about GM and AM but they are wrong in certain circumstances. Could someone explain their reasoning?
My fact why they are wrong is based ...
13
votes
5answers
893 views
How to estimate the probability of drawdown / ruin?
A fairly naive approach to estimate the probability of drawdown / ruin is to calculate the probabilities of all the permutations of your sample returns, keeping track of those that hit your drawdown / ...
11
votes
3answers
1k views
Free intra-day equity data source
Are there any free data source for historical US equity data? Yahoo finance has daily prices but I'm looking for something more granular and goes back 2 or more years (doesn't have to be close to tick ...
11
votes
3answers
740 views
How do strategies deal with corporate actions?
There are many corporate actions that will affect the stock price, like dividend, stock split and rights.
Given a large series of historical price data, how do we adjust the data to filter out the ...
7
votes
5answers
787 views
How can I quantitatively test the validity of momentum indicators?
I am learning about quantitative finance, and I am struck by how different it is from the techniques that make it into magazines and TV, particularly technical analysis. Specifically, if they say an ...
6
votes
7answers
2k views
Option trading API other than Interactive Brokers
I'm looking for an options broker that provides an execution API.
I'd like to ideally test on a papertrading version of it before connecting to a real execution engine. I know IB offers that, but they ...
23
votes
8answers
1k views
Option pricing before Black-Scholes
According to the Wikipedia article,
Contracts similar to options are believed to have been used since ancient times.
In London, puts and "refusals" (calls) first became well-known trading ...
15
votes
2answers
732 views
How to execute a large futures order?
I am currently trading futures products on some contracts that have low volumes. More accurately, the volumes of working orders in the book are fairly light. I am trying to execute a relatively large ...
10
votes
2answers
881 views
Is there a standard model for market impact?
Is there a standard model for market impact? I am interested in the case of high-volume equities sold in the US, during market hours, but would be interested in any pointers.
9
votes
2answers
452 views
What is the relationship between risk aversion and preference for skewness and kurtosis in portfolio optimization?
Is there any relationship between the risk aversion coefficient in an individual's utility function (commonly used in portfolio optimization) and the preference for higher moments such as skewness and ...
8
votes
1answer
533 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 ...
4
votes
2answers
325 views
Choice of prior as a shrinkage target in portfolio construction?
There's various research showing how priors such as the minimum variance portfolio turn out to be a surprisingly effective shrinkage target in portfolio construction.
The sell point of these priors ...
14
votes
3answers
949 views
Is there a way to estimate (predict) the half life of a quantitative trading system?
Usually even good performing quant trading strategies work for a while and then return start to shrink. I see two reasons for that which would probably give rise to different analysis:
The Strategy ...
13
votes
2answers
760 views
Is there a standard method for getting a continuous time series from futures data?
I would like to be able to analyse futures prices as one continuous time series, so what kinds of methods exist for combining the prices for the various delivery dates into a single time series?
I am ...
10
votes
3answers
1k views
Hedging stocks with VIX futures
It seems that VIX futures could be a great hedge for a long-only stock portfolio since they rise when stocks fall. But how many VIX futures should I buy to hedge my portfolio, and which futures ...
9
votes
2answers
1k views
How can I learn about the quantitative aspects of market making in illiquid single stock options?
I would like to learn more about the possible ways of doing quantitative research regarding option market making. In particular, while the mainstream index option market may be very liquid, the ...
9
votes
3answers
798 views
What is the ideal ratio of in-sample length to out-of-sample length?
Suppose you are running a portfolio of quantitative strategies and that you develop a new potential strategy to be added to the mix. Assume for simplicity that the new strategy is independent of the ...
9
votes
4answers
2k 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?
...
8
votes
2answers
456 views
Minimizing Correlation
Is there a quantitative method in monitoring trades to reduce the possibility of correlated trades?
7
votes
5answers
6k views
How to check if a timeseries is stationary?
I'm using KPSS Method to check if the series is stationary, but I would also like to use another test to confirm if the series is stationary or not, what method coudl I use?
7
votes
1answer
372 views
What techniques are used for testing order book implementations?
I am finishing the implementation of a limit order book for modeling NASDAQ. The order book works off of the ITCH feed. My question is what techniques are typically used for testing order books. I am ...
6
votes
2answers
1k views
Which algorithm should I look into to kick off my research in algorithmic trading? [closed]
I have recently undertaken a research into automated algorithmic trading algorithms.
The aim of the research is to focus on studying algorithmic trading and trying to improve a basic implementation ...
6
votes
4answers
481 views
Can risk aversion indicators anticipate financial crises? Research and/or strategies
In reference to this paper:
Can risk aversion indicators anticipate financial crises?
and the investable UBS Risk Adjusted Dynamic Alpha Strategy:
...
13
votes
3answers
1k views
Is there any theoretical basis for pattern-recognition strategies?
Mean-reversion and trend-following strategies have some kind of a theory behind them that explains why they might work, if implemented well. Pattern-recognition, on the other hand, seems like nothing ...
13
votes
2answers
2k views
What type of analysis is appropriate for assessing the performance time-series forecasts?
When using time-series analysis to forecast some type of value, what types of error analysis are worth considering when trying to determine which models are appropriate.
One of the big issues that ...
12
votes
3answers
603 views
How to account for transaction costs in a simulated market environment?
I am simulating a market for my trading system. I have no ask-bid prices in my dataset and use adjusted close for both buy and sell price. To account for this I plan to use a relative transaction ...
10
votes
4answers
622 views
Measuring liquidity
While liquidity is one of the key figure of financial markets, It seems to be very difficult to measure. Volume is sometime used as a proxy but can sometimes be completly irrelevant.
Could you point ...
7
votes
1answer
939 views
Multilayer Perceptron (Neural Network) for Time Series Prediction
I have it in mind to build a Multilayer Perceptron for predicting financial time series. I understand the algorithm concepts (linear combiner, activation function, etc). But while trying to build the ...
7
votes
4answers
946 views
What approaches are there to order handling in automated trading?
I am currently developing a commercial automated trading program in which users can write their own proprietary code and develop strategies, like in NinjaTrader, MetaTrader etc. Right now I am working ...
7
votes
2answers
1k views
SPX options vs VIX futures trading
Forward volatility implied by SPX options, and that of VIX futures get out of line. If there existed VIX SQUARED futures they could easily be replicated (and arbitraged) with a strip of SPX options. ...
6
votes
2answers
1k views
How to build a mean reverting basket?
I have been playing with mean reverting pairs, but seems that most of the low hanging fruit (ie pairs) have been squeezed already. I would like to start with mean reverting baskets (>2 securities) in ...
5
votes
2answers
581 views
Constructing an approximation of the S&P 500 volatility smile with publicly available data
Besides of the VIX there is another vol datum publicly available for the S&P 500: the SKEW.
Do you know a procedure with which one can extrapolate other implied vols of the S&P 500 smile with ...
5
votes
3answers
424 views
How do you remove expected returns from asset allocation strategies?
The classic mean-variance optimization problem tries to minimize variance of a portfolio for a given expected return:
$$ \underset{w}{\arg \min} \quad w^T \Sigma w \quad \text{s.t} \quad \mu^Tw \geq ...
5
votes
1answer
660 views
A generic limit order book: What are the most important queries it should be able to answer?
Assume a class LimitOrderBook which represents a limit order book in a trading system.
To be able to represent the limit order book a data handler reads a feed ...
4
votes
2answers
659 views
Mass Market Data Source
My current project requires large amounts of historical and real-time market data (1m or 5m bars for various products, mostly US futures for as far back as available). This data will be analyzed by ...
3
votes
4answers
489 views
Do markets typically fall fast, and rise slowly
I'm wondering if there is some measurement or name to this notion, i.e.:
Markets typically fall fast, but rise slowly.
It seems like this is the case -- get some bad news out of Europe on the debt ...
2
votes
2answers
969 views
How much capital do I need to create a competitive automated trading strategy?
I'm a relatively small investor, and I'm interested in building my own fully-automated quantitative trading strategy. I also read about dark pools, and how difficult it is to get good prices on ...
16
votes
6answers
9k views
What's the difference between volatility and variance?
How do they differ in what they imply about an underlying's (or any variable's) movement?
15
votes
4answers
1k views
13
votes
3answers
4k views
Correlation between prices or returns?
If you are interested in determining whether there is a correlation between the Federal Reserve Balance Sheet and PPI, would you calculate the correlation between values (prices) or period-to-period ...
12
votes
5answers
908 views
is beta of a portfolio always meaningful?
Consider the following strategies:
a stat arb strategy with no overnight exposure, but significant market exposure intraday.
a market timing model which is always long or short the market.
etc
is ...
11
votes
1answer
3k views
How to interpret the eigenmatrix from a Johansen cointegration test?
I ran a Johansen cointegration test on 3 instruments, A B and C.
The results that I got are:
R<=x | Test Stat | 90% | 95% | 99%
r=0 --> 36.7 | 18.9 | 21.1 | 25.8
r=1 --> ...
