Questions tagged [quant-trading-strategies]

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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Is there any utility to being able to predict an assets current price?

I was playing around with some models, and I'm able to predict a stock's current price based on the current prices of other stocks. This model is extremely accurate, although I can't see any use of ...
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How to calculate the log return of portfolio?

Suppose that we have five trades each day with these returns ($R_{day,trade}$) and we have 300 days in total: $R_{1,1}$, $R_{1,2}$, $R_{1,3}$, $R_{1,4}$, $R_{1,5}$ $R_{2,1}$, $R_{2,2}$, $R_{2,3}$, $R_{...
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what exactly is a time bucket? [closed]

I am refferring to kaggle optiver realized volatility prediction competition. In their intro : https://www.kaggle.com/code/jiashenliu/introduction-to-financial-concepts-and-data/notebook there is a ...
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When is the gamma of an iron butterfly spread positive? (Assuming stock price at t=0 is equal to the highest strike price)

I know the Gamma of a butterfly using calls is $$\Gamma_{butterfly} = \Gamma_{C_{K_3}}-2\Gamma_{C_{K_3}}+\Gamma_{C_{K_3}}$$ Where K3-K2 are the same as K2-K1 and S=K1, But under what condition is the ...
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factor evaluating methodology with factor return and factor exposure

studying with a factor model, I get confused more and more as I think about factor exposure and factor return The concept (or mechanism) I get used to is evaluating a factor's Long Short Return(Q1-Q5) ...
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Systematic trading strategies - Selling 1M Straddle

I am trying to compute the daily P&L of the following systematic trading strategy: sell each day a 1M straddle on EUR-USD from 04th January, 1999 to today. My dataset contains the strike, the spot,...
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Strategies That Are More To Resistant To Alpha Decay Than Others?

Are there certain categories of quantitative strategies, such as arbitrage, momentum, etc, that are more resistant to alpha decay than others? Thanks
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What is SIV and LMV in the hollywood stock exchange?

I am studying the Hollywood Stock Exchange (HSX). It is a popular prediction market/ stock simulator, that uses movies as stocks. In the patent details, US5950176A - Computer-implemented securities ...
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Value of trading strategy

A trading strategy is defined as follows: starting capital $v_0 = 5$ and 1 risky asset holdings $\varphi_t = 3W_t^2-3t$ where $W$ is a Wiener process. The problem is to find the probability of the ...
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Dollar-neutral "concave" equity strategies

In the following I'm referring to "concave" strategies in the broader sense of equity strategies whose profits are smaller and more frequent than the losses. Basic examples: mean-reverting ...
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Theoretical returns are not matching empirical ones in my backtest

I'm trying to implement a Backtest for my quant strategy but the calculated theoretical returns are not matching the returns from my implementation. Here's the example: On a given day I have 1 million ...
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Number of Fed Rate hikes prices in

Could someone please explain to me how the calculation of the market expected FED rate hikes is done? Thank you.
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Average probability of varying input data

New to the quant finance exchange. I am stuck with a question maybe someone could help me. In the table below I have calculated if price is up/down w.r.t to the open shown in the 2nd column with ...
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A theory behind an accumulation and distribution process

A concept of accumulation and distribution process was developed by Richard Wyckoff. In simple words a smart money sells shares in order to hit its buy limit orders, then starts to buy shares in order ...
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Equity curve money management strategy to minimize drawdowns

Some high risk/returns automated trading systems requires an on/off switch as a fail-safe feature and to minimize drawdowns. Besides using a moving average on the equity P&L curve to turn on/off ...
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Market Sentiment Concept Question

I came across an interesting concept question and was curious what other people thought: Let's say some commodity has a certain return distribution. Now, if one knows that over the next five days, ...
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What is the distribution of the trend-following strategy PnL?

Suppose you start with zero dollars; and a stock is at \$100 and goes up and down \$1 equally likely, i.e., both with probability 50%. A trend-following strategy, during a period of 31 days, works as ...
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Machine learning models for sequential truncated time series ahead of a series of events

After some unsuccessful searches, I am turning to the community for the following issue: Assume I am interested in the dynamics of a stock prior to FOMC meetings. I am interested in the 20 days prior ...
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Basis Trade- Long/Short vs Short/Long

I understand the long-short basis trade quite well, especially in the context of crypto. Say BTC is worth \$100. For example, buy \$100 of BTC, and short \$100 of a perpetual futures BTC-USD contract. ...
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Normalized statistical risk/reward measures to compare different quant trading strategy's returns, eg for backtesting

Want to select a metric or metrics to compare returns of different investment strategies, for quantitative backtesting, strategy selection, and forward measurement. Been reading different approaches ...
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Is there a financial instrument that is exposed to the change in growth of an asset over time?

Is there a financial instrument that is exposed to the rate of change of the value of a specific asset? If I believe a stock price will continue to grow in the future, but grow more slowly than in the ...
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How to adjust a strategy's alpha assuming a zero-value starting portfolio (\$0 cash, \$0 assets)?

A simple paper test of a trading strategy is to assume one borrows all money to purchase assets and see if trading increases the liquidation value of the portfolio (cash + liquidation value of assets)....
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Strategies for trading on a forecast

I have been experimenting with multiple methods of forecasting the daily high and low for a certain security. I have found a very basic ensemble of several common forecasting approaches is, well, ...
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How to generate normalized factor scores for beta exposure

I'm working on building a time series momentum model (TSMOM) based on price alone for currency pairs. I'm implementing a paper that produces a buy/sell signal based on geometric brownian motion and a ...
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Can grid strategy make profit on a random walk?

I've seen this thread, but it's a little too advanced for me. I haven't studied finance, just recently had some experience with grid strategy bots on cryptocurrency exchanges (in future markets), and ...
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how to do hedging in global market give the time zone issue [closed]

Hi I am considering a question: Give you have a global portfolio, consisting of U.S stocks, Euro Stocks or even Japan stocks and you have to rebalance daily according to my calculated trading signals. ...
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How to incorporate momentum in Ornstein Uhlenbeck to capture overshooting in financial markets?

In modelling asset prices, it is a good idea to model it using a fair value or target price concept. Recently Carr & Prado explored this idea to find optimal stop loss/take profit levels when the ...
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How to conduct statistical test to see if certain factors impact trading streategy

Since the seminal paper by Fama and French(1993) that uses size, market, and value factors to explain extra market returns on the equity market, people have conducted tons of research on equity factor ...
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Quantifying accuracy of candlestick OHLC patterns

Is there any way of quantifying the candlestick OHLC patterns? There are lots of patterns such as morning star, evening star and so on, but I have not found any statistics on how often these work out ...
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How do you hedge your inventory when doing arbitrage?

Say I want to do arbitrage between Exchange A and Exchange B on USD/AAPL. This requires that I hold equal parts USD and AAPL. I don't want exposure to the movement in AAPL. How do I hedge my AAPL ...
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What kind of data cleansing/scrubbing are hedge funds doing?

It's a well-known fact that several hedge funds have a handful of PhDs just doing data cleansing. All day. Every day. What kind of data cleansing are they actually doing? Is it really that difficult? ...
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Historical Options data

Are there any good sources where I can obtain daily historical options data (strike price, expiration dates, bid/ask spread, etc). I understand that this type of data is very hard to come by and ...
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increasing leverage does not increase MDD(maximal draw down) proportionally?

I thought increasing leverage by x times will increase mdd x times. But it actually increases mdd by y which is smaller than x. Is it always the case? If so, because leverage increases compound ...
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How to calculate basic components like trend, momentum, correlation and volatility in Pandas(Python)

I am new to quant. finance and trying to calculate trend, momentum, correlation and ...
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Calculation of Long-Short-Portfolio returns for different holding periods

I have monthly stock returns I want to invest in according to my trading signals. Now I want to figure out the optimal holding period of the long-short-positions. (The same time for both positions). I ...
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3 votes
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How to "best" exit multiple trades?

Let say I have N opened trades (N = s + b) that are partialy hedged, and paritaly not. In general s != b. Some of them are market sell orders (s), and the rest of them are market buy orders (b). They ...
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Barriers on structured notes

I asked a question here: Structuring and Customization Thanks to all the contributors. However, I now have a follow-up question. I would like to buy barrier options and I was informed from that post ...
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1 answer
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why am I seeing a value error? adv_fml. lopez de prado

This code is a snippet from Lopez De Prado Advances in Financial Machine Learning page 44 ...
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1 answer
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Why does a name error appear? adv_fml_lopez de prado. python 3.7 colab

...
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How to compute NPV of Latin American swap CLP-TNA (chilean) using quantlib?

I am trying to value the Latin Americans swaps. But CLP-TNA valuation is far off from the actual valuation. Please suggest, what I am missing in below methodology to compute NPV. ...
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What are the most common ways that quantitative funds construct industry/style-neutral factor portfolios?

For instance, consider momentum strategies. Naive portfolio construction will likely load on large style/industry return components, which increases portfolio risk dramatically. How do quant funds ...
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2 votes
1 answer
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Does time remaining matter in NO Touch-ONE Touch probabilities?

I asked a question some days back and got an answer which I understand and make sense: Probability of touching short call strike and not touching touching short put strike of a short strangle? However,...
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One touch UP no touch DOWN, One touch DOWN no touch UP [closed]

I was reading about exotic options and I came across something new. One touch down no touch up option and the other one I saw was One touch up no touch down option. I would like to understand how it ...
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1 vote
1 answer
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Questions regarding a “lite/kindergarten” Barbell investement strategy implementation

The idea for this question is more or less taken from a slight hint regarding how Universa Investments L.P. functions from Taleb's Antifragile (obviously the real case is far more complex but this is ...
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1 vote
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How to extract informative value from correlations of assets? Subadditivity of correlation calculation an issue

I was reading Nassim Taleb's Paper: Fooled by Correlation and found it very informative. I had always struggled with finding value in correlation in Finance, especially seeing a lot of bad ...
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4 votes
1 answer
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Question about calendar spread mean-reversion strategy

I'm excited to ask my first question here! I'll try to describe the mean-reversion strategy with some background, then explain what I couldn't understand. The strategy is described in Earnest Chan's ...
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How to choose a stock? [closed]

So far, I have only been working on systems that track numerous stocks and evaluate which present the best opportunities at a given time. I have grown curious about building a day-trading system that ...
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If 90% of retail traders lose money, doesn’t that mean price movements are not random?

If 90% of retail traders are said to loose money, which trade in the short term, doesn’t that mean price movements are not random? My reasoning is that if short term price fluctuations were ...
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3 votes
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What is the reason for using log prices in Pairs Trading (Cointegration)?

I was wondering, why some of the research papers on pairs trading (using the cointegration approach) are using log prices to determine the spread of a pair? Why are they not simply using regular ...
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Why not calculate Kelly using semivariance? As w Sortino

Kelly is calculated as mu / sigma^2. If we remove our highest performing returns from our calculations this actually increases our Kelly leverage, which does not make sense to me. A less profitable ...
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