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bio website twitter.com/experquisite
location Vancouver, Canada
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visits member for 1 year, 10 months
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Derivatives pricing in C++, automated trading in Scala.


6h
comment Is it important to equalize the minimum price fluctuation in pairs trading?
If your basket only has two contracts, then a linear regression on prices is fine. Some people attempt to trade the "ratio" of two prices, though, or trade flat 1:1 contracts, which is usually a mistake. There is always some debate whether one should be regressing prices or log-prices.
23h
comment Is it important to equalize the minimum price fluctuation in pairs trading?
I am not sure you need to account for the contract tick size, but you definitely need to account for differing variance or 'beta' of the two contracts.
Oct
27
comment How is stock data objectively different to this random walk?
Is your question "how are these plots objectively different [by eyeballing]?", or "is quantitative trading futile?" Stock market return distributions are very different from your generator, but that probably won't help you trying to trade them.
Oct
16
comment Importance sampling for barrier option like pricing by Monte carlo
You mean like references to importance sampling, control variates etc? I believe these topics were covered in Jackel's book amazon.com/Monte-Carlo-Methods-Finance-Jaeckel/dp/047149741X
Oct
1
comment Is it fair to assume $(ud=1)$ in the binomial tree option pricing model?
Right, my point is that there exist binomial models for non-recombining trees where your $ud=1$ condition doesn't hold, which still converge to a price as $\Delta t \rightarrow 0$.
Oct
1
comment Is it fair to assume $(ud=1)$ in the binomial tree option pricing model?
researchgate.net/publication/… seems to be regarding non-recombining binomial trees for options pricing, but I haven't read the paper.
Oct
1
comment Is it fair to assume $(ud=1)$ in the binomial tree option pricing model?
I'm pretty sure the condition for it to be convergent in the way you describe is just that the step size must be ~ $\sqrt{t}$. If you start assuming a log-normal process and constant volatility, that's when you start to get boxed into particular parameterizations.
Sep
30
comment Is it fair to assume $(ud=1)$ in the binomial tree option pricing model?
CRR's condition ud=1 leads to a recombinant tree, but binomial trees need not be recombinant, they are just much easier to calculate when they are.
Sep
16
comment How to select optimal betting strategy from backtest?
To add, why not use a clustering algorithm on the resulting profitable parameter vectors and then select the point in the center of the largest cluster?
Sep
13
comment Algo's Shadowing Limit Orders
I think you might mean "Lo and behold"
Sep
8
comment Basic question on LIBOR-OIS swap
Fed funds is the US overnight/OIS rate
Sep
6
comment Efficient Markets Paradox
Indeed. I think most of the emh stuff assumes a rational convex utility function over wealth, which is most likely not the case for most people. Eric Falkenstein has been a proponent of relative wealth utility functions being more likely, which leads to a much different landscape.
Aug
22
comment ADR vs Foriegn Stock Price Arbitraguers
fordschool.umich.edu/rsie/workingpapers/Papers526-550/r533.pdf is a study of this mechanism of evading capital controls.
Aug
22
comment ADR vs Foriegn Stock Price Arbitraguers
That concurs better with the current unofficial rate: twitter.com/SoberLook/status/501082814260211712 Perhaps people are using the ADR to get USD out of the country somehow?
Aug
21
comment What is the reasoning to derive this financial model called the Vasicek Model?
As I understand it, it was a pretty basic rationale - the short interest rate is mean-reverting, and they just supposed Gaussian diffusion. The OU process was well-known, tractable, so why not?
Aug
20
comment Approximation of different volatilities
I believe Pat Hagan did some work like this for his SABR model too, wilmott.com/pdfs/021118_smile.pdf formula A.64 may be relevant.
Aug
18
comment Testing for the presence of a positive or negative gamma effect
Maybe try a high-frequency hurst exponent test?
Aug
16
comment Calculating short/long order percentages?
You will not be able to tell short orders from sell orders, and furthermore, it doesn't look like you have any trade data at all. All you have is orders to sell and orders to buy. The problem you are going to (eventually) have is you cannot determine whether a reduction of the size on one side of the order book is caused by a fill (someone selling via taking liquidity) or by someone cancelling their resting buy order (possibly in anticipation of buying via taking liquidity).
Aug
11
comment How good is managed code for algo trading?
FWIW these days, anyone doing trading on the JVM will eventually be investigating Azul's Zing JVM, which features absolutely pause-less GC
Aug
7
comment High correlation will help detect spurious regression over cointegration?
I am not sure that the correlation really has anything to do with whether a cointegration model is spurious or not. You might get some additional insight from a principal components analysis?