2,577 reputation
516
bio website quant.stackexchange.com
location United States
age 38
visits member for 4 years, 1 month
seen Mar 12 at 18:36
  • primarily trade options(listed equities).
  • math background + quant masters
  • algorithmic developer

May
12
answered Parameters for pricing option on EDF
May
6
awarded  Revival
May
6
comment What is the best method to compute project volatility in Real Option Valuation?
heres's another simulation approach(not only for correlated inputs, but with more math): etd.auburn.edu/etd/bitstream/handle/10415/147/…
May
6
answered What is the best method to compute project volatility in Real Option Valuation?
Apr
22
answered Free market data (delayed or snapshot)
Apr
22
comment What type of investor is willing to be short gamma?
The only thing I'd add to this is that gamma is typically the tail wagging the dog in these trades. Trades that invole short gamma, particularly when described in terms of "rent", are attractive because of being long theta and willing to risk being short vol. Gamma is seldom a consideration because it's effects are not very pronounced until very close to expiration. The exception here is clearly if you are using close to expiry options as a hedge for the delta of a portfolio.
Apr
22
comment What type of investor is willing to be short gamma?
"being short gamma is being long volatility" - false. short gamma = short vol. "For ITM options, being short gamma is being long the underlying. " - false (eg short call (itm or otherwise) is short the underlying).
Apr
22
revised What type of investor is willing to be short gamma?
added 241 characters in body
Apr
22
answered What type of investor is willing to be short gamma?
Apr
21
awarded  Editor
Apr
21
revised How does return-based analysis calculate expected return of a trading system?
corrected typo
Apr
21
comment How does return-based analysis calculate expected return of a trading system?
instead of "clearly indicating that you should use this trading system" I mean clearly you should NOT use this system. Just compounding the returns returns (1.25*1.25*.6 - 1) gives u -6.25 (you can't add %'s together, you have to multiply them then it works.) (geometric return does this)
Apr
20
comment How does return-based analysis calculate expected return of a trading system?
@MilkTrader: don't use the arithmetic mean to calculate the expectation, use the geometric mean. this shows you the negative expectation in the case of your example, and the rest of the analysis still works. Geometric mean requires that all of your data samples are on evenly spaced data(like daily in your example). Also geometric mean is guaranteed to be always less than or equal to the arithmetic mean. (in your example the geometric mean is 93.75%, clearly indicating that you should use this trading system)
Apr
20
comment How does return-based analysis calculate expected return of a trading system?
@Milktrader Ahh, I see what you're saying, (trade vs return). This is why I mentioned the part about, "any level of granularity that you have data" So if daily returns is what you have, you still compute the average daily return, then look at min daily return, max daily return, and build a histogram, normalize, and go from there... This is a long way to say, YES... return based analysis uses the same approach as transaction based.
Apr
19
comment How does return-based analysis calculate expected return of a trading system?
@Milktrader: Technically it's the average of the daily returns. That is the expectation on any given day. However, normally this is not sufficient information. To make it useful one needs to look at winning trades vs losing trades and generate a histogram and then normalize(z-score) so that you end up with a confidence interval that allows you to say X% of the time the daily return will be within Z standard deviations of the expected daily return. Then you can choose how to size/risk decision upcoming trades.
Apr
18
comment How does return-based analysis calculate expected return of a trading system?
and don't forget the most important metric... max drawdown.
Apr
18
answered How does return-based analysis calculate expected return of a trading system?
Apr
5
answered Role of skewness in portfolio optimization?
Apr
2
answered Good quant finance jokes
Apr
2
answered Did farmers really buy options on the CBOE?