Hot answers tagged trading
11
Of course it is fast enough. But what is fast enough? I know guys who trade off Excel sheets and they make millions, but those guys are clearly not active in high frequency space. So, it entirely depends on your trading frequency and average holding period. I also know of shops that run live trading systems by calling R functions, so, obviously Matlab ...
8
Edit: Freddy's answer is good -- we wrote concurrently. He rightly points out that QF is a broad field, and that it is among other things a community. Here, I describe a practical, down-to-earth path for getting your feet wet in one key piece of it -- software and model development for derivatives analysis, starting with vanilla options. Your best bet ...
8
At the top of this list I still recommend you to seek employment in order to learn from others in QF space. Could you possible work in a quant team within an investment bank where you currently reside?
Start to reach out to the quant finance community so you are connected once you decide to locate to where you can practice this discipline.reach out to ...
7
I can think of an application in options pricing. I came across the following paper a long time ago but think it explains FT very eloquently as applied to pricing options under BS:
http://maxmatsuda.com/Papers/2004/Matsuda%20Intro%20FT%20Pricing.pdf
The fun starts on page 112 but it relies on the 1998 paper by Madan and Carr.
What I like about the paper ...
5
The main application I know of is in option pricing. Peter Carr has done some research here. For an introductory article see this one:
Option valuation using the fast Fourier transform by Peter Carr and Dilip B. Madan:
In this paper the authors show how the fast Fourier transform may be used to value
options when the characteristic function of the ...
5
I think there is a straightforward answer to this:
The associated costs of changing trading hours need to be justified by the benefits.
Exchanges, regulators, and large market participants such as banks, hedge funds, buy side long-only funds very closely communicate and weigh pros and cons when considering changes to trading hours. Obviously motivations ...
5
"quote spam", "book colouring", "quote stuffing", etc encompass any mechanism to modify the shape of the orderbook by a market participant who does not intend to really buy or sell shares thanks to these orders.
It means that someone fills the bid side of the book with 10,000 shares at different levels of price and does not want to buy at all, or only 100 ...
5
I found this solid overview of different trading algorithms by Deutsche Bank Research:
Trade execution algorithms
Designed to minimise the price impact of executing trades of large
volumes by ‘shredding’ orders into smaller parcels and slowly
releasing these into the market.
Strategy implementation algorithms
Designed to read real-time market data and ...
4
Not sure why Python is recommended when you clearly ask for a .Net solution (well you may look at IronPython but I do not recommend it given there are much better options, see below), aside the fact that Python is horribly slow even when performing non-mission-critical data analysis and research. Even C# easily runs circles around most python scripts, given ...
4
If I understand you right, you are talking specifically about Matlab's embedded code generation facility (see here: http://www.mathworks.ch/embedded-code-generation/). In my view, the answer to your question is clearly yes. This feature allows you to generate hardware specific code, e.g. for deployment on GPU's (video cards). It's used for aerospace ...
4
My answer is to go with option 2, but go long the long-dated contracts. Looking at the forward curve for WTI crude, one can buy crude, say, for 5 years out at $83 per barrel. Not only you can avoid the monthly rolls, you can take advantage of the current medium-term/long-term backwardation in crude.
4
The other answers are useful and sensible. I have worked full time in equity research for nearly two decades, so very much a "qualitative" rather than a quantitative approach. However, all the firms for which I have worked had quants and because of my casual interest in the area I've spent a lot of time talking to quant teams over the years, often over a ...
3
Louis's answer hints at the problem. Most market-data feed formats only use the order's reference ID for cancel, replace, or execute; they do not list the symbol or side. So you'll need a way to look-up the particular order by ID alone just to make adjustments. You can aggregate by price if your application requires it, but just know that the "level book" ...
3
The "correct" way is the way best suited to your trading. Regardless as to your data structure of choice, you have to maintain a list of all orders active on your book. That's because subsequent messages reference Order ID and you have to look up the corresponding order to determine the price level being acted upon.
Given that you have to maintain a ...
3
I think one of the best (and very current) articles about how to break into QF (for any kind of background) is:
"On becoming a Quant" by Mark Joshi
For your special background in mathematics see this excerpt from section 9:
The main challenge for a pure mathematician is to be able to get one’s
hands dirty and learning to be more focussed on getting ...
3
If I may share some wisdom that was passed to me and that I insisted I test empirically and through painful lessons learned to take seriously and trust in:
There is nothing that is guaranteed in life (aside us all having to die). You already sound like you made up your mind on the long side of the oil trade. Have you considered that not the demand for oil ...
3
There are:
Bloomberg: TOMS, SSEOMS, AIM, EMSX
TT Trading Systems (X-Trader, mostly for futures, spreads,...)
Orc Group: Orc (often used for listed options)
And uncountable others, really depends on which product you look to trade.
But please note that you asked specifically about automated trading and to be honest, most shops code up their own order ...
3
I just thought it is worth mentioning that the skew of the underlier implied by traded option prices and the options implied-volatility skew are indeed related by no-arb relation. The point is that you can integrate implied variance over the strike prices to get the unconditional implied variance (and hence volatility) of the underlier and the skewness of ...
3
Your first definition is wrong; I'm not sure where you got that from. Your second definition is correct: the ISO alerts the exchange that the submitting party has taken responsibility for RegNMS and requests a fill at only that venue's price; there is no routing away. Obviously, there is a huge red-tape burden to get permission to do this.
3
I have played around with those a bit and my results were mixed. Bollinger bands essentially show you the price relative to rolling window volatility.
One interpretation is that if the current price leaves the Bollinger bands, a trend or movement emerges (of course depending on your time frame as with all technical indicators) in that direction. The ...
2
Having developed many custom backtesting programs in the past, I wish I would have just started out by purchasing a decent commercial backtester for a few hundred dollars. The cost of buying one already completed will save you hours of time on learning the nuances and problems that come with backtesting implementation. Once you are adept at the ins and outs ...
2
There is a simple explanation in this specific case (SPX vs JPM rolling 90-day realized vol). When you look at the specific daily price series of SPX and JPM during August 2011 (a very bad month for most hedge funds) you will notice 2 main differences between each series:
1) JPM was already in a down trend and thus negative returns (or lower closing prices ...
2
Here is an interesting example which makes use of these concepts in emerging markets. Emerging markets are ideal because volatility tends to be higher so it can better be harvested:
Diversifying and rebalancing emerging market countries by David Stein et al.
Abstract:
We discuss the diversification and rebalancing of Emerging Market countries. Emerging ...
2
There is no standard way in quant finance to do this. Nevertheless you can use:
standard ways in statistics to deal with incomplete data sets;
specific points to take into account that you are dealing with transactions.
The standard statistical way to manage incomplete data is to use a Bayesian method: you model the usual cross-dependences between the ...
2
What about a total return swap on the price of oil?
In general, search for things with a high correlation or cointegrated with oil and check what risks you would take on compared to physically holding oil and see how you can minimize them. For instance, in the oil stocks case, you could short equity futures to only take energy stock risk instead of general ...
2
You should never start out asking how much data you should incorporate in your research effort. You should start with the following points:
Make sure you understand the difference between sampling size to specify your model and data used to run back tests over. Those are entirely different animals.
First, think about your end goal, what are you trying to ...
2
Yes you can, how depends fully on your required accuracy and also whether PC1 and PC2 are sufficient in explanatory power of the log differences of your futures contract.
Also, make sure you understand the signs of the eigenvalues (sign of the PC) can be different from one experiment to the next as they are arbitrary (the values are obviously not). Here ...
2
The broker algorithms or the trading algorithms are designed to the optimal execution of large amounts of stocks with different benchmarks (e.g. VWAP, PoV, Implementation Shortfall or Slippage, Price Inline, TWAP, DWAP, etc.). These algorithms sometimes uses statistical methods and market microstructure analysis (to analyse spreads, volume, seasonality, ...
2
Everyone can do what HFTs do, if they spend the necessary time and money to build and run the infrastructure required. This may involve becoming a regulated broker/dealer, but it is in no way an invite-only club.
Now, to your specific question, you'll find some information on Haim Bodek's site. Bodek does content that ISO's and Day ISOs are used to gain ...
2
I'm not really sure what your question is, you appear to answer it yourself...
If I'm understanding you correctly you are making 2 transactions at 0.6% cost, so then your profit = pred * d_price - pred*(trans) - pred/(1+d_price)*trans
That is just your raw profit minus your transaction costs at your opening and closing prices
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