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comment Where to find stock buybacks yields?
what is a stock buyback yield? There are various types a company can repurchase shares? In the open market, through private negotiation, among others. Thus, not always is a premium paid on top of fair value.
Oct
27
comment How is stock data objectively different to this random walk?
That is not what EMH states (that future prices follow a random walk). Even the statement in Wiki is plain wrong: "This implies that future price movements are determined entirely by information not contained in the price series. Hence, prices must follow a random walk." Just because future prices may not be a function of past prices does not infer future prices to follow a random walk.
Oct
27
comment How is stock data objectively different to this random walk?
You look at 250 data points. If you look at a longer term time frame you will notice the absence of upward drift in your random data model vs the drift component that partly drives equity (and its index) returns. For higher frequencies the quantity of "white noise" increases and a portion of any researcher's job becomes to apply suitable filters in order to isolate the time spans when non-random pricing data allow for alpha extraction.
Oct
27
comment Build a customizable trading engine in python
Way too broad question. You emphasize customization requirements and that basically requires an incredible code stack that will be beyond any simple project. Just want you to be aware of the fact that you will most likely spend a year if you build from scratch. And I highly recommend not to attempt this project in Python but an OOP language that is much more performant, with a more stable and mature code base and that is actually suited to handle modules like broker API connectivity, OMS, PMS, parallel event based processing, and the like. Just my 2 cents...
Oct
22
reviewed No Action Needed Negative Eonia rates
Oct
22
comment How do I calculate Sharpe ratio from P&L?
@afekz, well in the end you choose your tools. Anyone who uses Sharpe ratio metrics should know precisely what they measure. You cant come later and complain that SR did not account for operational risk or model risk. And I simply pointed out that SRs can be derived from P&L, regardless of the avg holding period of positions. And I am not happy to digress because I prefer to stay on topic. If you want to explore better measures then please open a new thread or ask a different question.
Oct
21
comment how to use known premium of options to determine premium of options with another strike?
Thanks for the clarification. I would still disagree with the described "shape". Especially currency option volatility smiles can hardly be described as linear on either side of the atm strike.
Oct
21
comment Where can I find literature (books, articles, etc.) about basic HFT / arbitrage strategies?
Excuse me but how are ANY of the above topics related to high frequency trading? Most everything in hft is related to the efficiency of hardware and technology rather than making probabilistic assumptions and/or predictions (other than of the most simple and computationally efficient kind). You would never reach microsecond space if you had to perform calculations that originated from any of the above topics you listed. And please do not confuse the latency space Simons operated/operated in with hft.(-1)
Oct
21
comment how to use known premium of options to determine premium of options with another strike?
@barrycarter, could you please elaborate? It is either linear or exhibits different slopes on either side (in which case it is hardly linear). I would argue that the function of the smile highly depends on the exact type of underlying asset but rarely is it linear (except in special cases).
Oct
18
comment How do I calculate Sharpe ratio from P&L?
I agree with you that Sharpe is a poor metric, there are better ways to assess risk adjusted returns. But certainly it is not to model the probability of an operational blowup. Its like heavily overweighting the jump probabilities in a jump diffusion model as part of option pricing, for example. And of course does a lot of the intraday volatility (hopefully) vanish when the law of larger numbers kicks in, that is precisely the central reason for the existence of hft shops ;-)
Oct
18
comment How do I calculate Sharpe ratio from P&L?
@afekz, I disagree. Of course does anyone in this space primarily concern himself with trading risk not operational risk. You can't argue that just because every now and then an operational issue blows up everyone thinks all day long about how much it would cost if their servers or some tiny bit of code blew up. Yes maybe an operational manager. But firms like this are run and driven by those who generate revenues not those who keep costs down. Profit centers have always trumped cost centers.
Oct
15
comment How do exchanges make money?
Furthermore I think you may not fully appreciate why Reg NMS is in the spotlight. A financial market's most important property is the trust by investors and the knowledge that transactions are conducted in a fair, open, and orderly fashion. This can hardly be said of the current fragmented equity market in the US, or can it? I like how you extracted (yourself or from other source) how exchanges generate revenues, but your diversion into hft is misplaced and not entirely honest imho.
Oct
15
comment How do exchanges make money?
I find your line of reasoning re HFT quite flawed, at least as you presented it here. Some of the practices by some HFT players in equity space are not under scrutiny as a function of how exchanges generate revenues. The two are completely unrelated. And nobody denied HFT are middle men, well I would actually challenge that because a used car dealer is making markets in cars even during an economic crisis, hft firms are nowhere to be found during extreme market volatility, hence they hardly fulfill the classic definition of a financial market middle man.
Oct
14
comment Forex buying 2000+ pip difference
@rupweb, the scenario, outline by OP, clearly indicates were are talking about a retail broker and quite a shady one to say the least. If they already engage in keeping such pitfalls open for clients to fall into then chances are very high they are unregulated to start with which means they do not see a reason to let the client off the hook given such shady technique netted them money. An initial loss of 5k is way enough for most such brokers to justify ignoring the client's request. Just my 2 hunches but this question actually does not belong on this site.
Oct
14
comment Is there anyone still using Markowitz modern portfolio theory?
Of course do fund managers care about their performance. But it is shocking to see fund managers padding themselves on their shoulder just because they outperformed most of their peers by an average 2% while they may in absolute terms have lost 20% in a given year. Where did I hint at the possibility that fund managers might not care about their performance?
Oct
13
revised Is there anyone still using Markowitz modern portfolio theory?
deleted 1 character in body
Oct
13
comment Forex buying 2000+ pip difference
I strongly disagree with your point. Many (if not most) currency retail brokers are unregulated and make no qualms about it. If someone funded accounts with them and got their .... ripped wide open then it is mostly the fault of the investor/"trader" because he/she signed contractual agreements. Even the most unethical brokers legally protect themselves by including contractual clauses that provide for the fact that investors agree with the price feeds and hence spreads they execute trades on. One can try to claw back money but the emphasis here is on hope rather than any certainty.
Oct
13
answered Is there anyone still using Markowitz modern portfolio theory?
Oct
8
comment How to reduce fx currency pairs ? PCA or other tools?
What are you trying to achieve? You want to reduce to a basket of pairs that are uncorrelated to each other?
Oct
4
comment Looking for Research Paper on Creation of Currency Baskets
@PhilH, got it, thanks for pointing that out. Will keep that in mind for future searches. Thanks