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comment Markowitz mean-variance optimization as “error maximization”
@vonjd Link to a free version of Kritzman paper: harrykatz.com/Final_Printer_Proof.pdf pages 165-168
comment Trading a synthetic replication of the VVIX (volatility of VIX)
I forgot to mention that is is not actually a var swap, it is the square root of an imperfect 30 day synthetic var swap. So there is no static replication with vanillas regardless.
comment Trading a synthetic replication of the VVIX (volatility of VIX)
Rocko, why are your answers usually 99% gibberish? Also, its not just a var swap, its a perpetual var swap with a questionable weighting recipe. You can't replicate it with a single swap, as you'll be out of synch in a day.
comment Calculating true value of a stock given the order-book and recent trades
@wildbunny mid-point is a biased estimator of true value. This has been known since Stambaugh, 1982 (or maybe 1983), a more recent exposition is papers.ssrn.com/sol3/papers.cfm?abstract_id=1420314
comment Cloning Return Streams
Replication via factor or style attribution at rho > 0.8 is not particularly difficult -- over the past. Not so easy looking forward, you'll always be trading last quarter's factor mix. Harry Kat's distributional replication approach might be worth a try, but none of the trading pools/allocations based on it have rung any bells, AFAIK.
comment Understanding Passive Rebate Arbitrage
It is a violation of Canadian securities regs to intentionally lock a market. Violates "crossed order provisions" and also Rule 2.2 of UMIR.
comment Why would a trader quickly flicker an order immediately preceding a tick away?
The flickered orders are postonly bid at 15.16. The exchange slides it back to 15.15 to avoid a locked market. Submitting firm sees the slideback and cancels. Then tries again. When the 15.16 offer is executed or cancelled out, the offer moves to 15.17 then the postonly bid at 15.16 goes through at the targeted price and gains good queue position. This tactic is pretty well known, not a mystery.
comment Why are GARCH models used to forecast volatility if residuals are often correlated?
Agree, GARCH and variants are commonly used in industry. I don't see how that is in dispute.