# Tag Info

6

I am not sure Dark Pools (DP) have been created to avoid "market manipulation". They have been created by firms because they found an advantage to create them (see Market Microstructure in Practice, L and Laruelle Eds.). The main reasons have been: spare market fees, for DP created by brokers (like UBS MTF); spare market impact, for block pools (like ITG/...

6

It doesn't matter since multiplication is commutative (in $\mathbb{R}$); you will always end up losing the same.

5

First we have to clarify what we mean by profits: I think your question can only address the fact that some human traders beat the market (because you also make profit by just buying the market, e.g. through an ETF). I think there are two, perhaps even three main sources: Randomness, luck (as @PerAlexandersson) correctly pointed out - financial markets ...

5

A public order book gives traders information not only on the current price of a security, but also the volume and structure of the entire supply and demand schedule. Such information can be used for arbitrage and market manipulation strategies in various ways: Spoofing: Inserting a large limit order as an apparent buy or sell signal which is canceled any ...

5

This effect is coming from the supply and demand in the options markets. Many portfolio managers want (or need) to buy out of the money put options, and many are willing to sell out of the money call options (thereby funding the purchase of put options). Now, when the market goes down, dealers find themselves short vol and they need to buy options to cover ...

4

Personally I hate the term "roll cost" and prefer "roll yield" or "effect of rolling". It is not really an out of pocket cost (it involves no outlay or receipt of cash). It has to do with contango and backwardation. When you close the contract that expires soon, it is priced close to Spot, but the new contract that you enter into may be priced above or ...

4

Here is a collection of papers. The general idea is that the market has investor classes that share different expectations. When in bubble territory, many investors generally agree that assets are overpriced, but they still invest in expectation of more investors entering the market (the greater fools). There are also sophisticated investors who know assets ...

3

The opening and closing prices are set during an auction. If there are overnight news, then the opening auction will reflect information which wasn't there during the closing auction. And even without the auctions, the last traded price yesterday results from different orders than the first traded price today.

3

The right amount of confidence and courage to take risks with other people's money without shading into overconfidence and bad judgement. Especially coping with the emotional pressure of losses without losing your head and doing the wrong thing. It also helps to do mental arithmetic quickly and accurately and have a good short term memory for figures, all in ...

3

While amsh's answer definitely gives you what you need for interview purposes, for any visual learners like me, here's what running through all possible paths ends up looking like. Another thing I might consider bringing up in an interview context would be the intuitive reasoning behind why it works out this way. In other words, just explaining that a 15% ...

3

It is very difficult to outperform the "random walk without drift" benchmark. The forward rate is not a particularly good predictor as it is often biased. Nevertheless some economists claim it is possible. Here is a literature review (Rossi 2013): http://crei.cat/people/rossi/Rossi_ExchangeRatePredictability_Feb_13.pdf From reading this it would seem that ...

2

There is a cost for the roll because there is a value to the extended maturity that you are picking up. There will be dividends and a cost of carry for the hedger who is selling it. An index arb desk will look at the roll and decide to bid or offer depending on where they can carry the underlying basket. That dictates the prices of the rolls. Right now ...

2

In testing such a strategy, I have noticed that some days it performs extremely well (sometimes yielding a 75% win rate with 12/14 trades winning) whereas others it bombs (20% win rate with only 2/10 trades winning). This is the key. From the information you provided it would appear that you have failed to consider the effects of draw-down. The strategy ...

2

As a beginner in AlgoTrading QuantConnect and Quantopian are great for practice and improving your skills but for a serious Algo Trader , they are basically useless. An Algo Trader requires flexibility to investigate trading ideas and add or remove libraries or parts of the system that do not work. You need to automatically and constantly reevaluate your ...

2

There is trading happening overnight. A nice paper is Dong Lou et. al: http://personal.lse.ac.uk/loud/OvernightMom.pdf They explain the overnight trading and actually document that most known anomalies occur on that period.

2

Yes, that can be really sophisticated even using such nice tools as pandas. But the basic idea is to find position enters & exits to derive cashflow. Here is my code to derive all that stuff from generated signals (in my backtester signals are fractions of 2 stocks in portfolio for each moment). I hope I've found all bugs here, but no warranties. ...

2

This might not be a suitable answer, but I refer to the book "The Black Swan" by N.N. Taleb. If you start with 1000 equity traders, that base their investments on dice throwing, most will make profit when the market goes up. When it goes down, surely, some traders will make a loss and leave the game, but even after a long time, people with no strategy at ...

2

Disclaimer: "soft" answer. While Gordon's comment is very true, I think it's worth adding that it also depends heavily on the fund, its approach, and its strategies. Maybe you find a place that does some signal processing stuff, in which case complex definitely helps. But there are a lot of places where you could get by without being well-versed in real/...

1

Well stock prices change all the time when markets are open. American options give you the opportunity to exercise it at any time up until maturity, whereas a European option only allows you to exercise it at a specific date and time. A simple example is to compare an American option that matures in 1 day and European option where it matures at the last ...

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One example could be someone using option strategies and its underlying dividends. In these cases, the trader could use early excersise to capture the dividend value. Google it for more information.

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The easiest way is to use a specific holiday code while downloading the schedule from Bloomberg ("cdr = CE", in the API formula). if not, you might have to rely on wikipedia or other public source, and just remove the holidays from a more complete list. While the date changes every year, the HOLIDAYS doesn't.

1

Just take a look at the bid ask spreads plus transaction costs. It's nonsense what you are saying because on one side you implicitly assume enough liquidity so you market maker executes the Delta of your position. On the other hand you assume the market is liquid so you can move the market when you sell your position.

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The way to do gradual position entry and exit is to use multiple trend following rules, each of which is responsible for managing a part of the available capital. Only if all the trading rules agree will 100% of the capital be deployed. As a simple example, suppose you have three rules. The first rule is based on 10 day momentum; this rule produces a score ...

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Before making regression you have to perform test on fractional integration on each component. The power and size of traditional unit root tests are poor. The tests’ weak power implies that the statistical tests cannot distinguish between a unit root process and a fractionally integrated series with long memory (Baillie, 1996). As a consequence, a mean-...

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Of your list, usd callable swaps are definitely most popular, as, they are needed by banks to hedge fixed rate mortgages. Ps, jeebs answer is not relevent for the interest rates markets

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Given that you're tradeing low volumes ($<1\%$ of volume, I take), I would not assume more than 1 bps slippage in your case.

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