Quantitative trading strategies use quantitative signals and a set of predefined systematic rules to make trading decisions. Strategies operate within parameters based on historical analysis (backtesting) and real world market studies (forward testing). Strategies may be executed manually (by a human trader) or automatically (by a computer).

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### How can well-documented phenomena with predictive implications for pricing exist?

This is a general question. I will give an example: The cross-sectional seasonality effect is the phenomenon where assets' average past returns during specific time intervals (e.g., same weekday) ...
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### Comparing implied volatility in 2 different correlated assets

The general idea here is that I am trying to compare the volatility surface of two different financial assets whose prices and returns time series exhibit a strong relationship/correlation : The ...
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### Forward price arbitrage

To price a forward on a stock we usually use arbitrage to find that the price of the forward is the price of the stock compounded by the risk free rate. I don't have the data to try things, so was ...
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### Is this a valid implementation for volatility targeting?

Let positions size for the instrument be $$K_t \frac{V_t \Sigma^{target}}{\tilde{N_t}} \frac{1}{\sigma_t P_t}$$ where $$K_t = \bar{K}_{t-1} \frac{\Sigma^{target}}{\Sigma^{realized}_{t-1}}$$ where $V_t$...
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### Is it correct to define hedge ratio of a mean-reverting portfolio based on the cointegration parameter?

Suppose we have yields time series of 2 bonds, and estimate the following cointegrating relationship: $$Y_{A} = \alpha + \beta Y_{B} + \epsilon,$$ where where $Y_{A}$ and $Y_{B}$ are the yields of ...
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### Are there any programs that show the highest limits order on the market?

Super noob here, and I'm sure this is already a thing but I can't find it... Often times on various stocks there are huge limit orders that have a have a high likelihood of bouncing the price. I was ...
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### using a normalized formula from a book but not getting the correct values

I'm attempting a normalization formula (seen in the picture) but I'm not getting the result of 0 and 1. Instead I'm getting values greater than 1 and less than 0 (seen in the other picture). I wrote ...
1 vote
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### Interview question: strategy with perfect R2

I got a question in an interview, not sure if I got it: ‘’’ We trade stocks and futures, and you can both long and short for futures. Assume you built a perfect quantitative trading model with perfect ...
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### Stochastic optimization for day trading

Suppose we have a forecast of price changes for a set of assets and we want to day trade based on it. I'm guessing this would involve some kind of stochastic optimization - with presumably a decision ...
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### What does it mean when a systematic strategy yields significantly different backtesting results with minimal changes to the backtesting starting date?

I am testing a simple systematic strategy: I buy a certain product once every five business days and sell it after three business days from the buy date. In the backtest, this is how I define my ...
1 vote
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### Market Data UST

There a lot of new market data providers for retail algo traders. For example the famous one for option is Theta Data Net and for Equities it is Polygon IO. You basically get all the greek/price data ...
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### How to Compute Returns from Cumulative PnL and Price Data for Portfolio Optimization in Algorithmic Trading?

I have a set of algorithmic strategies. Each strategy focus on a specific financial product and generates entry and exit Long or Short signals. So for each strategy we can have periods in which we are ...
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### What factors determine performance of mean-reversion strategy? What is the role of volatility?

I assume that P&L of mean-reversion strategy should depend on several factors. One important factor is optimal timing (optimal entry/exit points to open/close positions). This is quite intuitive. ...
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### Does AI-based trading assume efficient market hypothesis?

When we use AI (machine learning/deep learning) in trading does that assume efficient market hypothesis? I know quantitative finance assumes price moves are random (efficient market hypothesis). Does ...
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### Quant Strategies on longer time frames

I'm researching quant strategies suitable for retail traders, focusing on those beyond the typical 1-3 month holding period. Traditionally, retail strategies are influenced by insider information, ...
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### Risk aversion and inter dependency in finance

In almost all papers that I read in quantitative finance trying to model a situation where several financial agents interact the distribution of the individual risk aversion is considered as ...
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### Does switching between Bond and Equity closely tracking Interest rate generate more returns?

Is there an evidence to suggest that we buy bond during high interest regime and when interest rates goes down , we sell the bond and buy Equity Index .. Repeat this by closely following the central ...
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### Calculating PIN or PIN-like factor without having intraday / tick data

I am looking for a method of estimating PIN (probability of informed trading) for US equities without having access to intraday / tick data, but using daily OHLC instead. I imagine its impossible but ...
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### Options related factors forecasting cross section of returns

I came across this research paper that shows that skewness derived from options surfaces can help explain the cross section of returns. https://pubsonline.informs.org/doi/10.1287/mnsc.2015.2379 Are ...
282 views

### PnL of a delta-hedged straddle

On Twitter, this question has been making the rounds: If you sold a 30 vol for a one year out at the money straddle, have access to free, perfect, and continuous delta hedging, and stock realizes a ...
1 vote
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### How find optimal entry/exit thresholds for a mean-reverting process?

Suppose we have $\{X_{t}\}$ mean-reverting process. The goal is to find optimal entry and exit thresholds which can maximize P&L of the trading strategy. I have 2 "empirical" approaches ...
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### Can MACD with a broad range of parameter combinations beat Buy and Hold under the Efficient Market Hypothesis?

I conducted a study with Moving Average Convergence Divergence (MACD)s in the range of ...
1 vote
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### Am I overcomplicating this approach to optimal actions based on a forecast?

I have been attempting to implement a simplified version of the model used in this paper which, given a forecast of future data, provides an optimal way of acting on it by choosing an optimal sequence ...
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### Relative performance of StatArbs strategy

This is a more general question regarding the performance of statistical arbitrage strategies... Are there any studies done on the performance of a large set of StatArb strategies? I want to have some ...
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### IDE to use for Python for Quant Trading [closed]

Dear Quantitative Finance Stack Community, Since many Quantitative propietary trading firms seem to be using Python over alternatives such as STATA. I have now decided to get myself familiar with ...
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### Marginal effect of asset in a strategy

Im trying to develop a stastical arbitrage strategy that depends on a universe of assets and in a brief way, they replicate some factor(s), index(s), etf(s), etc, and then trade residuals. So, after ...
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### Trading strategy with only knowledge of price increase/decrease?

Take a hypothetical model that takes a stock as input and outputs "up" or "down" indicating if the stock price will increase or decrease in a fixed time interval T. Assuming the ...
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### Reference for Aggregated Temporary Price Impact

I am wondering if someone knows relevant literature on the joint temporary price impact. The temporary price impact here refers to the difference between the best ask/bid price and transaction price ...
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### Good ways to approach this dynamic probability/expected value game

There are 3 coins labelled A, B and C. You are told that the coins have probabilities of 0.75, 0.5 and 0.25 of landing on heads but you don't know which coin has which probability. In order to ...
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