0
votes
0answers
110 views

forward- and backward adjusting stockprices

Do you guys know if a paper has been published that discusses forward- and backward adjusted stockprices, and the look ahead bias coming from backward adjusted data?
1
vote
2answers
932 views

Data feed API that uses REST?

Is there a data feed provider that has a REST (http) API? Preferably real-time and historical, at least for US equities.
8
votes
3answers
4k views

Can the Hurst exponent be greater than one?

Can the Hurst exponent be greater than one? Does it mean that the time series follows a random walk or that it's not stationary?
7
votes
1answer
305 views

Alternative liquidity measures

I'm going to write the MSc thesis on flight-to-liquidity phenomenon in stock markets and I'm interested in liquidity measures other than Amihud or bid-ask spread. What are some other popular measures ...
4
votes
3answers
639 views

Calculating the right portfolio(position size for each leg) in a Long/Short Strategy

For a Long/Short Strategy, I have two stocks with different volatilities. How can I calculate the right position size for each leg? *The pair trading is not coming from co-integration but more as a ...
2
votes
2answers
711 views

.NET statistical packages recommendation

What open source or commercial .NET statistical package would you guys recommend? I am doing statistical arbitrage in options. The functions I need mainly are regressions, optimizations..etc. It would ...
2
votes
1answer
485 views

Risk neutral probability in binomial short rate model assumed to be 0.5?

This should be a basic question but I have not been able to find a satisfying explanation. In the simplest binomial model, the risk neutral probability is computed using the up/down magnitude and the ...
5
votes
5answers
549 views

Construction of “vol of vol”

How do you construct something that lets you buy "vol of vol"? not necessarily for VIX, but any particular stock or index.
8
votes
2answers
1k views

How to transform process to risk-neutral measure for Monte Carlo option pricing?

I am trying to price an option using the Monte Carlo method, and I have the price process simulations as an inputs. The underlying is a forward contract, so at all times the mean of the simulations is ...
1
vote
2answers
574 views

Order and position management in (semi-)automated trading system

A simple and lazy approach to implementing an order and position management (OPM) component in a (semi-)automated trading system: leave most OPM to counter party (broker/exchange). Even then funds ...
1
vote
1answer
252 views

Minimum variance hedge with more than one asset

My portfolio comprises of 3 assets A,B,C that are correlated and the variance-covariance structure is known. At any given point in time, my position in Asset A say is given to me. I need to ...
2
votes
2answers
1k views

Does Interactive Brokers (IB) have a Web friendly API?

The requirement I am given is to implement a web ppplication which utilizes Interactive Brokers's API to fetch data. I went through the IB API web page and came across two viable methods: TWS and IB ...
8
votes
4answers
986 views

Multi Factor Credit Risk Models

I am working in the area of building credit risk models. Upto this point, the model I have been focused on using the Asymptotic Single Factor Model, more popularly known as Vasicek Single Factor ...
5
votes
1answer
853 views

Statistical significance of trading systems that use indicators with long lookbacks

Let's say we have a trading system that trades daily, holding for one day, but uses an indicator that looks back over the last 5 years. A simple example could be the percent change in price of an ...
0
votes
2answers
500 views

What information do stock exchange colocated servers have access to?

In high frequency and low latency trading, decisions are done on the spot by servers colocated in stock exchanges. This implies that those servers have immediate access to the information they need to ...
2
votes
1answer
277 views

Resources for performance statistics of trading systems

I'm looking for an online resource to study the usual performance statistics (CAGR, MaxDD, Payoff Ratio, Win/Loss Ratio, etc.) of trading systems, preferably trend-following systems. I know that ...
6
votes
1answer
934 views

Where do swap rates and/or long-term forward rates come from?

I apologize if this is supposed to be obvious, but ... . Libor spot rates are quoted up to a year, beyond that one can use Eurodollar futures to continue to build the curve. Let's say up to 3 years. ...
4
votes
3answers
983 views

Searching for pairs-trading in sub O(n^2 t) time

Let there be $n$ stock symbols. Let each stock symbol have exactly $t$ ticks (with all ticks miraculously aligned.) We are now searching for potential pairs for pair trading. A brute-force solution ...
5
votes
1answer
411 views

Major FX pairs - Pentahedron Data Structure

I read an interview today with Stephane Coquillaud. He talked about this idea of formulating a data set of the G5 currencies as a pentahedron. The obvious benefit is the fact that there is more ...
2
votes
1answer
145 views

Why for one year (and not two or three) government bonds (there is a spike for Switzerland & Denmark)?

On 10.10.2012, I have looked at the bond-rates and, both for Switzerland and Denmark, there is a discontinuity/spike at 1Y, as per below Switzerland: ON= -0.09, 1W= -0.180, 1M= -0.230, 3M= -0.2, 6M= ...
4
votes
2answers
751 views

Which objective function should I choose to minimize tracking error?

Let say I have $n$ assets and their returns over $m$ periods which are represented by a matrix $X \in \mathbb{R}^{m \times n}$, and I have some other asset with return over the same period which is ...
1
vote
0answers
467 views

Oscillatory time-series forecasting

I was wondering if this mean(160)-reverting/oscillatory time series "SUM" can be considered chaotic & forecastable to some extend short-term? ...
1
vote
1answer
532 views

CARA Utility function expected utility

I have been trying to undestand how the expected utility for a CARA negative exponential Utility function is calculated. In my particular case the variable has normally distributed returns. Could ...
2
votes
0answers
79 views

How to trade risk-adjusted returns?

Why does dividing daily returns by daily range eliminates fat tails and results in an (almost) gaussian distribution? And how could that distribution be exploited to enter trades?
3
votes
1answer
165 views

How do I model risks for specific short-term short calls in a portfolio with limited data?

I'm trying to do some risk analysis on a portfolio of bonds, currency, stocks and short calls. The short calls expire in approximately 15-30 days and I've only got around 20 days of pricing data on ...
2
votes
1answer
224 views

Greeks and Option Premium

If a linear sum of options is constructed such that the premium payout is zero, then does it mean that resultant greeks of the cumulated options positions will be nearly zero. For simplicity, lets ...
3
votes
3answers
1k views

Trading a synthetic replication of the VVIX (volatility of VIX)

In the same spirit as this question: Trading a synthetic replication of the VIX index. The VVIX tracks the volatility of the VIX. One cannot directly buy and sell the VVIX index and, as opposed to ...
4
votes
0answers
168 views

Discrete-time Jump-Diffusion Model

I am wondering if anybody could point me to any literature that talks about a discrete time version of the jump-diffusion model, I am aware that there is a paper by Amin (1993) that shows a discrete ...
2
votes
2answers
1k views

Detrending price data for analysis of signal returns

I'm looking to conduct hypothesis tests on some of my trading signals to see if the signal returns are statistically significant enough to falsify my null hypothesis that the signal has no predictive ...
2
votes
1answer
230 views

In Yahoo! Finance, what determines the number of decimals for a stock/index quote?

In Yahoo! Finance, we see the following quotes among others: ...
3
votes
1answer
158 views

How to properly cross-validate when optimizing SVM classification?

I'm using SVM binary classification to predict movement of NASDAQ stock prices. My question is regarding cross-validation. I will divide the training data into V subsets. Training will be performed on ...
5
votes
2answers
185 views

Can money technically flow in and out of stocks or asset classes?

For every buyer, there is a seller. Money can't 'flow' in and out of a stock, only the price changes. Is this applicable in the context of asset classes, for example, money market funds versus stocks? ...
4
votes
0answers
156 views

Rolling window Kendall's tau against APARCH(1,1) correlation

Assume you want to forecast the correlation matrix of a stocks' basket (say 15 ~ 20 stocks from different sectors); assume you need to forecast at $T$ days because you will use the forecast ouput with ...
3
votes
1answer
331 views

How to calculate probability of touching a take-profit without touching a stop-loss?

How to calculate probability of touching a take-profit without touching a stop-loss (no-dividend stock, infinite time)?
8
votes
4answers
1k views

Why the interest rate for put-call parity is not constant?

Usimg the put-call parity $C - P = S - K · e^{-rt}$ I tried to estimate the value of $e^{-rt}$, the present value of a zero-coupon bond that matures to 1 in time $t$: $e^{-rt} = (P - C + S) / K$ ...
2
votes
2answers
446 views

performance attribution

I am trying to do some performance attribution for a few portfolios we manage. What I am trying to examine are three different sources of returns: The general asset allocation Security Selection The ...
3
votes
2answers
957 views

Pair Trading Index Options

Suppose the trade is between Index Options of two Indices X and Y which are quite similar (but not exactly). So for the equivalent strikes, one can quote option on Index X and cover in Index Y. But ...
2
votes
1answer
229 views

Combining covariances?

Consider an economy with assets with return processes $A$, $B$, $C$, $D$. Consider a weighted index with return process $I=aA + bB + cC + dD$ where $a,b,c,d$ are coefficients, and $a+b+c+d = 1$. ...
7
votes
4answers
4k views

Analyzing tick data

What are some of the commonly used techniques to analyze tick data? I am looking at tick data to see how the quotes/ mid-price evolves due to certain events in the market. Since tick data is ...
-3
votes
1answer
660 views

Is it possible to “steal” financial data on publicly traded companies off the internet? Legally, I mean, what is the truth about “data” as a property

What constitutes "stealing" when it comes to publicly posted financial data? I think there are three instances of this that we can individually vet: a.) you physically broke into a location or ...
1
vote
1answer
94 views

Generating Return Streams for stress testing

There is never enough market data for testing. And sampling from user defined distribution is a hotly debated subject as which distribution does the market really go with? There are many ways to ...
3
votes
2answers
2k views

How to account for bid/ask spread when backtesting?

I'm backtesting an algorithm for trading nasdaq stocks, and would like to take into account the spread. I am using historical data from yahoo, which contains: open, high, low, close, volume, adj. ...
7
votes
3answers
4k views

Why would a 6M LIBOR rate be significantly above 3M LIBOR, ED futures and swap rates?

Just was just looking at the various interest rates and noticed this: ...
2
votes
2answers
497 views

constructing a minimum variance portfolio

Assume a US-based company has sold something to a Norwegian company. It will receive 1M Norwegian Kroner in two months, and would like to hedge this future cash flow against currency exchange risk. ...
9
votes
2answers
3k views

When to use Monte Carlo simulation over analytical methods for options pricing?

I've been using Monte Carlo simulation (MC) for pricing vanilla options with non-lognormal underlyings returns. I'm tempted to start using MC as my primary option-valuating technique as I can get ...
17
votes
2answers
602 views

Measuring Behavioral Finance Effects in Fund/Portfolio Manager Analysis

I want to know if there are some standardized measures to evaluate how irrationally human a portfolio manager is. Are there any performance measures or scorings for behavioral finance effects? How ...
3
votes
1answer
12k views

How to calculate equally weighted market portfolio

There's two studies that test the same thing in different markets (i.e. they apply the identical methodology). They state: 1) "$R_{mt}$ is the equally weighted average stock return in the dual-listed ...
5
votes
0answers
151 views

Testing for stock market herding over short periods

The literature has well established methods for testing stock market herding over a decent time window. Are there any ways that have appeared in the literature to test for stock market herding over ...
2
votes
1answer
463 views

Running a simple alpha estimation test for statistical significance of a signal

I'm looking for some direction on testing whether a simple entry signal has statistical significance. Let's say this is my simple entry signal: Buy when some indicator has a positive slope and is ...
1
vote
1answer
168 views

Resampled efficient frontier length of simulation

I was provided with a VBA program from my lecturer that applies the resampled efficient frontier. We have an investment horizon $T$ (6 years) and he uses a multivariate normal distribution with ...

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