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22h
reviewed No Action Needed Negative Eonia rates
1d
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.
1d
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.
1d
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)
1d
comment What are good internship positions I should look for as an undergrad student?
...trading positions. Maybe not for a hft shop but my MFE at CMU got me started in exotic options pricing and trading. And that is how most everyone is hired at such desks unless they already possess solid work experience.
1d
comment What are good internship positions I should look for as an undergrad student?
a) I think most any practitioner would prefer a solid PhD who finished the program but no work experience vs any academic dropout with an internship. An internship means nothing. Actually I look at it negatively. If an intern could not secure a job in the same firm what does that tell you? Of course solid work experience in a related position is an entirely different story. b) MFEs do not ever cover tax issues nor annuities. What you describe is what MBAs cover in their finance 20x courses...c) jump diffusion models, stochastic calc, and the forth are HIGHLY applicable to front office and...
1d
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
Oct
3
comment Looking for Research Paper on Creation of Currency Baskets
@PhilH, sure when knowing the exact title. Apparently it was not that straightforward a find given I posted my question 2 months ago (and included the terms "principal components" and specifically mentioned I look for a paper that targets fx/currencies.) ;-)
Oct
2
reviewed Approve suggested edit on How high of a Sharpe ratio is implausibly high for a low-frequency equity strategy?