Tag Info

New answers tagged

1

My experience in statistical arbitrage desks (primarily equities) and CTAs is somehow different than @Simon's. From my perspective, I have used and seen plenty of portfolio optimization tools. However, I have most often operated in a layered architecture. A layered architecture is an architecture where independent automated traders are stacked, each and ...


0

Most money is not quantitatively managed, as you point out. If those managers don't use any quantitative methods in their process then it doesn't really matter if MVO is a 50+ or 500+ year old concept. Also, since there are many subtleties to proper application of these techniques to a particular strategy, it is unlikely that a manager would use them if she ...


2

Portfolio optimization techniques are used quite a bit by hedge funds. I think you misunderstand how portfolio optimization operates in the context of an active trading strategy. Your question suggests a view of portfolio optimization as a tool to adjust portfolio weights arrived at by a separate, active strategy. Under that approach, you are correct, the ...


1

Well, given that either LM or BHHH is supposed to stop when the Kuhn-Tucker condition is satisfied, I infer it has to be stepwise. I would say otherwise if, say, they were potentially using something like SALO (simulated annealing with local optimization), where one algorithm could profitably run in full as a sub-step of the other.


5

An AR(1), once the time series and lags are aligned and everything is set-up, is in fact a standard regression problem. Let's look, for simplicity sake, at a "standard" regression problem. I will try to draw some conclusions from there. Let's say we want to run a linear regression where we want to approximate $y$ with $$h_(x) = \sum_0^n \theta_i x_i = ...


2

I work on Quant hedge fund. My answer is: YES and NO:) Advanced optimization techniques are popular in academia but less useful on the street. Specifically, the answer really depends on which type of strategies you are trading. For equities long-short portfolios, some level of optimization is needed, partly because they need to trade on large sizes on ...


0

I made a micro-test and the trinomial tree seems to be fast enough. (From my original comment) As described in Brigo & Mercurio illustrate, a numerical procedure to evaluate the Black and Karasinki model has been presented in Hull and White, "Branching Out", Risk magazine, 1994. Hull and White make use of a trinomial tree, which may indeed more ...


1

I don't understand how technical indicators are at all relevant to the question. State probabilities can be generated directly from the returns if the model is known. There is no need to guess at heuristic trading rules based on technical indicators. Let $r_t$ be the return at time $t$. Your model is $E\{r_t | s_t=i\} \sim N(\mu_i,\sigma^2_i), i=0,1$ ...


1

The specific procedure depends on details of the problem such as What is the objective function? Sharpe ratio? Terminal wealth? What is the model of transaction costs? What is the data resolution? (If it's very high the problem may become challenging computationally). There are many papers, e.g. this one, that solve various problems of this sort. These ...


1

you can smooth your data and then find the zeros of the slope of the smoothed data. You can adjust for the costs with the degree of smoothing.



Top 50 recent answers are included