All Questions

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 ...
19
votes
6answers
2k 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 ...
18
votes
3answers
838 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
2answers
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 ...
8
votes
1answer
747 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 ...
12
votes
6answers
2k 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 ...
7
votes
4answers
1k 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 ...
7
votes
1answer
509 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 ...
0
votes
2answers
618 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 ...
7
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 ...
1
vote
0answers
144 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 ...
8
votes
2answers
380 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 ...
20
votes
8answers
3k 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 ...
24
votes
11answers
3k 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 ...
6
votes
3answers
337 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 ...
39
votes
6answers
11k 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 ...
19
votes
6answers
6k 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 ...
18
votes
8answers
7k 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 ...
5
votes
2answers
633 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 ...
1
vote
0answers
90 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… ...
18
votes
3answers
5k 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 ...
5
votes
1answer
136 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. ...
6
votes
1answer
567 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, ...
8
votes
6answers
2k 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?
1
vote
2answers
907 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 $USD 100$. ...
3
votes
0answers
184 views

What is the longest number of consecutive days that options implied volatility has stayed “extremely high” for any particular underlying?

Curious as to whether or not there is any sort of all time record. Any index, future, or stock will do. Volatility must be well above the average 1 year volatility for all periods.
12
votes
4answers
5k views

data on historical stock price of bankrupt companies

does anybody know a site where I can download historical data on stocks including companies that have gone bankrupt such as lehman brothers? it appears that bankrupt companies no longer appear in the ...
4
votes
4answers
7k views

What is the role of Credit Valuation Adjustment (CVA) desks in investment banks?

What does a CVA (Credit Valuation Adjustment) desk do, and how are its activities different from other trading desks? Can you work as a quant for a CVA desk and consider your role "front office"?
9
votes
1answer
284 views

penalizing negative skewness by linking $U(\mu)$ and $U(\Sigma)$

Consider $U_1(\mu,\Sigma)$ and $U_2(\mu,\Sigma)$, where $U_1(\mu, \cdot) = U_2(\mu, \cdot)$, $U_1(\cdot, \Sigma) = U_2(\cdot, \Sigma)$ such that \begin{equation*} arg\inf\limits_{\mu \in U_1(\mu, ...
5
votes
3answers
562 views

Black-Scholes No Dividends assumption

I am doing some research involving black-scholes model and got stuck with dividend-paying stocks when evaluating options. What is the real-world approach on handling the situations when an underlying ...
13
votes
5answers
1k views

George Soros models

Mr. Soros in his books talked about principles which are not used by today's financial mathematics — namely reflexivity of all actions on the market. Simply it can be given by following: ...
6
votes
1answer
690 views

Modern problems in financial mathematics

I have a MSc degree in the area of Financial Mathematics, but I am doing research now in other field of stochastics. Could you please tell me about the most important problems of (stochastic) ...
4
votes
1answer
310 views

An equation for European options

So, any European type option we can characterize with a payoff function $P(S)$ where $S$ is a price of an underlying at the maturity. Let us consider some model $M$ such that within this model ...
11
votes
3answers
1k views

Role of skewness in portfolio optimization?

What is the role of skewness in portfolio optimization?
5
votes
3answers
567 views

What are the limitations of brownian motion in finance? [duplicate]

What are the limitations of brownian motion in its applications to finance?
4
votes
1answer
264 views

Did farmers really buy options on the CBOE? [closed]

I recently become interested in finance. Many books discuss options as simple examples of derivatives. I also read some "popular books". I read in "The Poker Face of Wall Street" that almost no ...
5
votes
3answers
582 views

Financial Products Markup Language

I am asked to map financial products into XML. It can be in any format. I know there is an open specification FPML. Is that worth to adopt FPML rather than my own standards? Also, how common FPML is ...
8
votes
3answers
6k views

Trading C++ Libraries

Are there any free c++ libraries that would have some of the functions that would be used in developing a trading strategy. For instance, calculating drawdown, Volatility Forecasting, MAE, MFE....etc. ...
13
votes
4answers
2k views

Good quant finance jokes

Have a good quant joke? Share it here. The principle "should be of interest to quants" trumps. I would be particularly keen to learn jokes which involve some nontrivial finance/mathematics. I am ...
15
votes
3answers
3k 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.
9
votes
3answers
616 views

better estimator of volatility for small samples

One commonly used sample estimator of volatility is the standard deviation of the log returns. It is indeed a very good estimator (unbiased, ...) when the sample is large. But I don't like it for ...
7
votes
5answers
850 views

Trading a stock (or other asset) based on Bollinger Bands.

One way investors analyze stocks is on a technical basis. Looking at Bollinger Banks (20 day moving average +- 2 standard deviations) is one of the most popular technical tools. Some stocks trade ...
4
votes
4answers
480 views

Given two portfolios with identical correlation matrices, which one will have a better risk/reward ratio?

I have one portfolio with high beta stocks, and one with low beta stocks. Is it better to have higher expected return with high volatility, or medium expected return with medium volatility? (All from ...
4
votes
1answer
524 views

Need historical prices of EUREX American and European style options

I am trying to get the historical price data on selected American and European style options at EUREX. I am not familiar with their system. Does any one know whether they have something like yahoo ...
20
votes
6answers
4k views

Time-series similarity measures

Suppose I have two time series $X$ and $Y$ of stock prices. How do I measure the "similarity" of $X$ and $Y$? (I'm being deliberately vague as I don't have a particular application, and I'm curious ...
3
votes
1answer
554 views

Few questions on Binomial-Lattice Option Valuation

I have just started applying Binomial-Lattice, however I am yet to fully understand few things. My questions are: What is the concept of working backward (left side) from the values in terminal ...
3
votes
2answers
786 views

Risk neutral probability in binomial lattice option coming greater than 1…what's wrong?

I am substituting reasonable values in the below fomula (like r=0.12, T=20, nColumn=16, sigma=0.004)...why is probability coming out to be greater than 1? Any help? Thanks! ...
6
votes
4answers
724 views

Software for decomposing structured products into plain vanilla products

Nowadays structured products (or packages) with complex payoff diagrams are omnipresent. Do you know of any software, add-ons, apps, code whatever, that enables you to enter a payoff diagram or a ...
20
votes
8answers
2k views

How to design a custom equity backtester?

I was thinking about writing my own backtester and I realize I have to make some assumptions. So I was hoping I could post what I am planning on doing and hopefully some of you can give me some ideas ...

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