# All Questions

548 views

### What is Quantization?

I have asked myself many times about Quantization Numerical Methods, is anyone here familiar with the subject and could give a reasonable insight of what Quantization concepts are about, and what are ...
557 views

### Proving Random Walk Hypothesis in Stock Market

Given the time series for a particular stock market, what are the statistical weapons one can bring on to prove, or disprove that random walk hypothesis?
533 views

### Are special condition identifiers (e.g. AIG+) standardized?

Suffixes indicating class, preferred, new, etc., are well defined for NASDAQ and NYSE, but I can't find anything documenting the meanings of the trailing punctuation. For example, here's some that I ...
308 views

### What is a cubature scheme?

Ideally an intuitive explanation with an example, please.
341 views

### Are there any standard MBS coupon stack models?

I need to model MBS coupon stack prices. It would not be difficult to create something from scratch, but I don't want to re-invent the wheel (and explain why I did) if a somewhat standard model ...
447 views

### What is a Structurer?

People "on the Street" distinguish between quants and structurers. Who are the structurers? what do they do?
2k views

### Fundamental Theorem of Asset Pricing (FTAP)

In the spirit of canonical questions please state here versions of the FTAP in the following form (please only one theorem by answer) : Necessary definitions (or a direct link to definitions) ...
2k views

### Is there a technique for using xts or zoo objects with options data (i.e., many entries per date) in R?

I am starting to work with options data from optionmetrics. I use data frames, but it seems like xts or zoo objects are the way to go for features and speed. I can't figure out the best work-around to ...
3k views

### Volatility pumping in practice

The fascinating thing about volatility pumping (or optimal growth portfolio, see e.g. here) is that here volatility is not the same as risk, rather it represents opportunity. Additionally it is a ...
1k views

### What is a Quant

In the interest of having "canonical questions" on this site ... What is a Quant?
1k views

### Statistical properties of stochastic processes for moving average trading to work

Common wisdom holds it that a moving average approach is more successful than buy-and-hold. There is quantitative evidence for that across different asset classes (see e.g. this book, or this paper ...
6k views

### What is the implied volatility skew?

I often hear people talking about the skew of the volatility surface, model, etc... but it appears to me that a clear standard definition is not unanimously in place among practitioners. So here is ...
5k views

### What is a martingale?

What is a martingale and how it compares with a random walk in the context of the Efficient Market Hypothesis?
1k views

### Does mean-variance portfolio optimization provide a real edge to those who use it?

Mean-variance optimization (MVO) is a 50+ year concept, and perhaps the first seminal idea of quantitative finance. Still, as far as I know, less than 25% of AUM in the US is quantitatively managed. ...
3k views

### Any research on how natural language processing can be used to forecast stocks?

Is there any published research of decent quality linking news or unstructured information to asset returns? I know that Thomson Reuters offers its Machine Readable news (MRN), so somebody must use ...
635 views

### How do macro funds manage risk and model asset returns? Do they use factor models?

Some of the largest funds in the world are entirely macro-based: Soros, Brevan Howard, Bridgewater. They trade across asset classes, and seemingly with very concentrated allocations. What type of risk ...
1k views

### Are there ways to measure the risk aversion of a representative investor, based on publicly available market data?

Are there ways to measure the risk aversion of a representative investor, based on publicly available market data? Public available data could include asset price, volume, and flow data, and may be ...
14k views

### Is the Interactive Brokers API suitable for hft?

By hft here I mean anything with holding period less than 5-10mins... Any empirical/anecdotal evidence of using it successfully on even higher frequencies?
5k views

### How 'High' is the frequency in HFT?

How many trades per second are we talking about? What kind of strategies are used in this time frame? Can the small guy play the game?
6k views

### Is F# used in trading systems?

Similar to this other question about Scala, I'm interested in knowing whether F# is used to any measurable degree in financial circles. Have there been any successful shops using it, any research on ...
9k 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 ...
1k views

### How to make sense of VXX and the people who bought it?

I don't quite understand how anyone would invest in VXX (asides from short-term trades)... Since the VIX term structure is generally in contango, the VXX is doomed to bleed to death. Therefore, how ...
2k views

### Categories of systematic trading strategies?

What are the main categories of systematic trading strategies (e.g. momentum, mean reversion), as might be considered by an index or fund-of-fund analyst? Are there any common sub-strategies?
937 views

### basic stock trading strategies [closed]

What are some trading strategies for stocks (just stocks, no derivatives) using freely available online data sources?
983 views

### How significant is slippage in a successful quant fund?

On average, how much slippage (measured in lost % return potential) is typical for an operating quant fund that trades in, say, major U.S. equities?
572 views

### What quant terms to use to search for papers about “stop-hunting” trading strategies?

Are there any papers about possible trading strategies you can apply when you know where a large cluster of orders is located in the order-book? These seem to fall in the ...
351 views

### Is there something like opportunistic “superstitious” trading?

This sentence in the following paper got me thinking: "Some traders [...] trade every pattern whether proven or not, expecting authentic ones to produce positive results, whilst the profits and ...
2k views

### How do banks actually make money on mortgages [closed]

This is a bit of a subjective question and relates primarily to the UK market There are a number of banks who are lending at BOE + 1.49% (ie: 1.99 %) whilst at the same time accepting deposits paying ...
16k views

### Wealth Management Vs Asset Management [closed]

What is the difference between the two? Today in the FT I see that UBS is the second biggest 'wealth manager' after BOA whilst I was always under the impression that Blackrock was the largest asset ...
537 views

### What are the ensemble techniques to forecast returns?

It was pointed in an other question that ensemble methods can help to reduce curve fitting. What are your experience with these and which one seems the most appropriate? If I had two forecasters that ...
671 views

### How to limit the nbr of cross-gamma calculations in a delta-gamma VaR calculation?

Many times, we want to calculate VaR using some parametric approach (delta-normal approximation for instance) when historical simulation or monte carlo are simply to slow. This is fine as long as only ...
438 views

### Black-Equivalent Volatility

Can Someone Explain to me what this term means, and how it's used?
2k views

### QuantLib in industry

How much is QuantLib used in industry and how much street cred does it have?
553 views

### Expected Growth

The model assumption of the Black-Scholes formula has two parameters for the geometric Brownian motion, the volatility $\sigma$ and the expected growth $\mu$ (which disappears in the option formulae). ...
2k 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. ...
1k views

### Does the debt load affect the volatility of equity?

Does the debt load of a company have an impact on the stock price of a company and its volatility? Also, how does the market react to the announcement of a company issuing bonds?
653 views

### Extensions of Black-Scholes model

For the Black-Scholes model my feeling is that the volatility parameter is like sweeping stuff under the rug. Are there models which improve on the volatility aspect of Black-Scholes by adding other ...
2k views

### Is it possible to use a series of option prices to predict the most likely path of an asset?

I've always wondered about this. If you have a series of options, with the expires spaced let's say one week between them, and you search for each expiration date the option with the smallest ...
504 views

### How to use binomial tree for portfolio of equity products

How can I use a binomial tree to price a European option that's based on a portfolio of equity products? I have volatility and correlation matrix of all underlying products? Looking for a formula ...
5k views

### Probability of touching

For a vanilla option, I know that the probability of the option expiring in the money is simply the delta of the option... but how would I calculate the probability, without doing monte carlo, of the ...
22k views

### What is the difference between volatility and variance?

How do volatility and variance differ in finance and what do both imply about the movement of an underlying?
6k views

### What is the intuition behind cointegration?

What is the intuition behind cointegration? What does the Dickey-Fuller test do to test for it? Ideally, a non-technical explanation would be appreciated. Say you need to explain it to an investor ...
3k views

Everyone seems to agree that the option prices predicted by the Black-Merton-Scholes model are inconsistent with what is observed in reality. Still, many people rely on the model by using "the wrong ...
819 views

### Solving Path Integral Problem in Quantitative Finance using Computer

I've asked this question here at Physics SE, but I figured that some parts would be more appropriate to ask here. So I'm rephrasing the question again. We know that for option value calculation, path ...
1k 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 ...
761 views

### Deterministic interpretation of stochastic differential equation

In Paul Wilmott on Quantitative Finance Sec. Ed. in vol. 3 on p. 784 and p. 809 the following stochastic differential equation: $$dS=\mu\ S\ dt\ +\sigma \ S\ dX$$ is approximated in discrete time by ...
3k views

### The Application of Quantitative Finance in Sports Betting

I notice that on the surface, there are some similarities between quantitative sports betting and quantitative finance. Both has the concept of arbitaging etc. What are the applications of ...
340 views

### How to combine various equity measures into a single measure (vector magnitude)

I have several measures: ...