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Jan
17
comment Normality assumption in Sharpe ratio
@JoshuaUlrich, I disagree with that notion. SR calculations for any return distributions are 100% accurate. SR of a bond portfolio can be fairly compared with an emerging market stock portfolio. After all the returns are scaled by their own volatility measure. The problem arises due to a problem with the definition of SR itself, it penalizes out-sized returns to the upside, which are desirable yet not properly accounted for in SR computations.
Jan
17
comment Normality assumption in Sharpe ratio
@user6997, you should mark this as correct answer if you think it properly addresses your question
Jan
17
comment How does a cross trade pose a problem to the retail investor
I am not well-versed in US markets but I cannot imagine that crossing between brokers can be accomplished for listed stocks without having to report the trade in any regulated market. In most regulated market even internal crosses (crossing inside the same regulated entity) requires the cross to be reported to the exchange within a certain time period. But to answer your question, crossing itself generally does not harm any other market participants except those who would have otherwise received commission. There are hundreds other practices that harm retail investors more than crossing does.
Jan
17
comment Is there any open-source library, implementing “exchange” to be used for algorithms running on the same computer?
I have not heard and cannot imagine such open source library exists. You would need to write it yourself which is not particularly complex, given the rather simplistic requirements you outlined.
Jan
10
comment How much does a Grid Computing software cost?
I am not suggesting the above are perused by any of the professional firms (as stated my post was supposed to be a starting point to get acquainted). But saying cloud computing and cloud storage is not utilized by banks and hedge funds is absolutely untrue. We are not talking about sensitive items such as email servers or algorithmic code repositories but there are a host of other applications that are stored on the cloud by a host of firms. One such example is an application repository where IT staff can download and install apps on users' machines.
Jan
7
comment Lagged dependent variable, yes or no?
I would strongly recommend to add such lagged variable. If liquidity today indeed has a lot of predictive power to forecast liquidity tomorrow then you should of course include it in your model. I do not see a reason why not. The rest of the market has any and all past/prior information at its disposal and you are missing an important input by not including it. I get the impression you potentially make your life much harder than it has to be...
Jan
7
comment MonteCarlo simulation of stock prices using milstein scheme with dividend yield?
you build the dividend yield directly into your pricing model and evolve the paths. The derivatives will be priced off the final model.
Jan
3
comment How to become a registered market maker on an exchange
and how is your question related to Quantitative Finance in the slightest? It is as unrelated as asking "Is trading currencies cheaper through futures or cash fx"?
Jan
3
comment How to become a registered market maker on an exchange
this is not a quant related question
Dec
24
comment HFT enhancements for FIX (Simple Binary Encoding) vs proprietary protocols performance and cost
So, then specify where you look to connect to and I am sure you will get a whole lot more meaningful responses. Merry Xmas.
Dec
23
comment Library for interactive financial charts
take a look at sciChart, you will be blown away. I tried your suggestions some time ago for a C# UI project and performance was abysmal for large data sets (or my development guys could not get a good handle at optimizing the library during the trial)
Dec
23
comment Extrapolating implied volatilities to small time
For such short dated options the iV correlates very highly with the moves of the underlying. Develop a robust model to forecast short term moves in the underlying and you have a model to forecast iV for such short expiries.
Dec
23
comment HFT enhancements for FIX (Simple Binary Encoding) vs proprietary protocols performance and cost
@Nikos, which fruit is the healthiest to eat and which will reduce the likelihood of ever getting sick? What do you think your doctor will reply when you ask him such question?
Dec
23
comment How to trade volatility?
Then you should trade the gamma of the underlying options, simple as that, though I highly doubt that you have a reliable point forecast of future realized volatility. But hypothetically speaking if you had then you could profit by buying or selling gamma.
Dec
19
comment How can I calculate the margin requirements for a Bitcoin futures contract?
I can hardly wait for futures and other derivatives on an asset that itself changes hands at realized 100%+ (almost no matter over which timeframe) volatility. I guess with the end of the QE program phased in today we all need to start chasing other paper tigers.
Dec
18
comment BS Implied Volatility under Normal returns
How do you define "theoretical prices"? Option prices or the prices of the underlying? Keep in mind that price volatility of the underlying or the option itself are completely different concepts from implied volatility, even the dynamics of their correlations are completely unpredictable.
Dec
16
comment Random Brownian Simulation Startling Results
I highly suspect you set up something incorrectly on your spread sheet in terms of random number generation. First of all I think we can all agree that theoretically the subsequent results of fair coin flips are independent of each other. Even Excel's basic random number generator is good enough to get you an expected value of almost 0.5 if you simulate, for example, 10000 times. Now, a betting strategy is an entirely different issue but you should first get the basic setup right. Double check your Excel functions
Dec
16
comment Random Brownian Simulation Startling Results
I disagree, for such simple game you can just link the seed to the current seconds/milliseconds passed since 1900. I like to emphasize that we are here talking about a simple thought exercise not a complex system in which a much better random number generation algorithm is demanded.
Dec
2
comment Which measure to determine Risk?
There are no robust methods in risk management, though there are sound and reasonable ones. That is all I can tell you from a practitioner's point of view, someone whose positions have been "frozen" all of a sudden intraday multiple times because the exchange halted the stock and re-opened it days, sometimes weeks, later. Someone who had to deal with multi limit-up/limit-down days. You get the point, I hope; there are no robust risk management models that capture such events. Look to properly handle 95% of the cases, which is what is already provided and deal with the rest on your own.
Dec
1
comment Which measure to determine Risk?
...just adding one additional thought: Does it matter what your professor or even Ito thinks how risk should be defined if you adhere to theoretical models no matter how remote they are from reality if your trading desks lose tens of millions just because traders were not forced earlier to reduce risk. And all that because your "models" did not yet flag limit violations because they are so abstracted from reality.