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Oct
10
comment What is an acceptable Sharpe Ratio for a prop desk?
I believe that daily is most common. Intraday would require some kind of mark-to-market accounting of open positions, which opens up a pandora's box. Should positions be marked to prices at near-side of book? far side? midpoint? What if the position is larger than the quotes on the top level? Intraday strategies can have high Sharpe ratios while earning less than one minimum tick size per trade so estimates will depend very strongly on the procedure used. There is no such ambiguity for daily profits when not holding overnight.
Jun
12
comment Optimal trading strategy in toy world of simple Hidden Markov model with Gaussians
Richard- I didn't write $E\{...\}$ for any distributions. Also, I don't understand what your point is RE: $\mu_0 = \mu_1$. In that case the solution is a constant, but this is just a special case. In any event, since the OP is trading based on an HMM, it is quite unlikely that $\mu_0 = \mu_1$ here.
Jun
12
comment Optimal trading strategy in toy world of simple Hidden Markov model with Gaussians
Added detailed proof of Sharpe ratio <> mean-variance equivalence. This is a standard result though.
Jun
12
comment Optimal trading strategy in toy world of simple Hidden Markov model with Gaussians
Richard- The forward backward algorithm is exact, so no.
Jun
10
comment Why shrink the covariance matrix?
Positive definite implies non-singular
Jun
9
comment How do I find the most diversified portfolio, or least correlated subset, of stocks?
This answer doesn't really address the question of selecting 5 stocks. You state "If you wish, you can...", but don't really justify your suggestion.
Dec
9
comment George Soros models
I very much agree that game theory is the relevant discipline. In particular, the subfield of learning in games, also called evolutionary game theory.