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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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53 views

Calculating % Return in Pairs Trading Strategy

Hi guys Could you help me here? I would like to calculate the return of a Pairs Trading strategy. For example: 18/11 - Open the Trade: I will go long on A and Short on B: Stock A : $ 32.24 Stock B ...
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96 views

Live trading strategies developed on daily data

This is a very simple perhaps naive question. Let's say I have a stock price prediction model trained on daily closing prices of that stock. So when I use this model for live trading, I'll have ...
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50 views

Alpha generation and factor models

I have studied factor models in a very introductory manner, going through there Fama-French model and then APT. I understand the concept of decomposing returns into factors, but I don't understand how ...
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140 views

INTERPRETING PCA ANALYSIS

I am having little trouble figuring our which variables are the most important when I am using PCA . What I am trying to do is see which variables explain the most variance when it comes to stock ...
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34 views

Are there any known text analysis NLP bots that read 8k filings, news, twits, articles - “understand” them and trade based on their derived meaning?

I want to build an NLP bot that "reads" and understands meaning and sentiment of articles, twits and trades on them. E.g. understand general sentiment of comments under important financial blog posts ...
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116 views

PCA FOR STOCK PICKING

lets say I am an equity analyst and I want to figure out what fundamental metrics I should use when I am analyzing an industry , I can use pca on a bunch of stocks in an industry using their ...
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40 views

How effective is simplex projection for portfolio sizing? How is Euclidean projection different?

I am looking at a backtesting framework where the authors do a simplex projection to get final long-only weights. They also have a version with Euclidean projection to simplex. I wanted to understand ...
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43 views

Vexing issues to be aware of fitting volatility smile

I wanted to know what one should be aware of trying to fit volatility smile. Besides the arbitrage issues. What are some of the real life vexing issues associated with this process. What is a non-...
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80 views

evaluating garch models

I used ugarchroll to backtest my garch model on S&P returns this is my code ...
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64 views

Is there a good book/blog on applying statistical methods in finance? [closed]

I am learning a lot of tools in statistics, but I am having a hard time figuring out where I could apply these methods in finance, especially in relation to investment and trading. Is there a good ...
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1answer
85 views

Pairs Trading situation Spread changes

I'm setting up and following a pair trading operation by the method of summing the distances squared (SSD). After determining the best pairs, I have to track the spread between the normalized prices. ...
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85 views

pca for yield curve

I used Principe component analysis on yield curve data this was the result ...
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1answer
81 views

Choosing best expressions from all possible combinations on variables, unary operators and binary operators along with hyper parameters

I have a few financial variables of a stock universe like OHLC prices, volume, and other fundamentals with varying time-frequency. Using this set I'm creating an expression that gives the weights to ...
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117 views

What are the best [free]resources to learn C++ particularly for quantitative finance?

What are the best free, online resources to learn C++ for quant finance? The course by quantnet seems too expensive for a broke student like me! If there are any free online resources, let me know! ...
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77 views

Bootstrap Method for Assessing Pairs Trading Performance

After reading this paper I tried to replicate it. I almost done, but I am stuck on the section 3.6 where the author constructs a random pair (how he constructs this?) for Assessing Pairs Trading ...
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44 views

Option arbitrage on two correlated or cointegrated underlying assets

If two indices are highly cointegrated, does it allow for some set of statistical arbitrage strategies for european options for which those indices are single underlyings ? Does answer change if ...
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1answer
22 views

In a cleared inflation swap agreement, what determines how much “collateral” a party needs to deposit into the third party escrow account?

Does realized inflation or expected future inflation determine how much money needs to be placed into the escrow account each day?
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64 views

When to remove a trading strategy?

Every strategy has a limited lifespan. How do you decide when to stop a particular strategy as it has lost its edge? Few of things that can be thought is strategy crossing its maximum drawdown, net ...
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65 views

Kingdom of Denmark Nikkei put warrants

I have read in a book from Emanuel Derman that Goldman Sachs manufactured a derivative in the early 90's that consisted of buying cheap puts on th Nikkei index (and paid in Yen), combined them which a ...
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99 views

How would this 10s/20s steepener work

Say I'm interested in a trade that wants to execute a 10s/20s steepener This is done via a receiver leg on the 10s and a payer leg on 20s Look at the following example (the figures are all ...
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1answer
50 views

Exposure/Factor Analysis on a loan portfolio?

I am working on performing factor analysis on a loan portfolio. This is my understanding so far, and I was hoping that some of the smart folks here might be able to chime and guide me through this ...
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1answer
158 views

What on earth is an Alpha Model in the quantative investment process?

I am confused with the useage of the concept "Alpha Model" in quantative investment. According to Qian, Hua & Sorensen (2007), the first thing in the toolbox of quantative investment process is "...
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572 views

What is the appropriate benchmark for a Long/Short VIX futures strategy?

Trying to figure out the benchmark for a L/S Vix futures stragegy, doesn't seem like only long or short Vix futures would be appropriate, any ideas? Thx
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194 views

Supertrend indicator formula

Recently i am working on an indicator called "Supertrend", however i am a hard time to get the right value. The formula ...
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2answers
74 views

How does duplicate data affect backtesting?

Before developing a trading strategy, one should clean and preprocess his data set. It is very common that a data set contains huge number of duplicates. Question: How does duplicate data affect ...
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1answer
138 views

ARMA+GARCH day-trading strategy

I have a question regarding this particular post on quantstart: https://www.quantstart.com/articles/ARIMA-GARCH-Trading-Strategy-on-the-SP500-Stock-Market-Index-Using-R In it, he designs a day-...
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49 views

What are your favourite benchmarks for signal (pre-trading strategy) backtesting?

In some situations, e.g testing the value of individual signals to be built into an ensemble method, it can be a bit too early to implement trading logic for the strategy needed to do a standard ...
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343 views

Position sizing in algorithmic trading

Good morning, I have a question, regarding position size in algorithmic trading. I have a strategy that every day generates signals for buying or selling positions on different stocks. I'm looking ...
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2answers
126 views

Why do we need event-driven backtesters?

I am reading this article at quantstart regarding event-driven backtesters. It seems to me that the main advantage of using an event-driven backtesters is that it avoids look-ahead bias. Usually I ...
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78 views

Stock prices and PCA

I'm trying to construct a portfolio using PCA based on a number of stocks. I was wondering what the best way to standardise the stock prices are. Which method would be more appropriate? Standard ...
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1answer
70 views

generalisation of cointegrated stock pair strategies to multiple cointegration

Question: as it is well known, there are strategies to trade pairs of stocks which are known to be co-integrated. See for instance here: https://medium.com/auquan/pairs-trading-data-science-...
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198 views

What are quant trading competitions besides IQC?

I am interested to participate quantitative trading competitions. I am residing in Singapore. The only quant trading competitions that I know are International Quant Championship (IQC) and SMU ...
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1answer
69 views

In-sample and out-sample backtest performance, how to do this?

I have a strategy in development that I am backtesting to optimize for parameters, a total of N combinations. Trying my best not to overfit. I run the first backtest for the in-sample period and I ...
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2answers
175 views

Reference on Futures basis trading strategy

I have heard that it is possible to trade on the futures basis. In my understanding, the futures basis is essentially the difference between the futures price and the underlying asset (also referred ...
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1answer
110 views

How can stationary time series data be used as input in an ML model?

I am halfway through "Advances in Financial Machine Learning" by Marcos Lopez de Prado. I understand that a time series like stock prices can be transformed to make it sufficiently stationary. ...
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58 views

How to properly hedge a short vol taking into account hedge stop loss?

Suppose a short straddle. In practice, hedging with long/short futures exposes to the risk of hitting a stop loss when market movements are wide. Eventually, it may very well happen that the hedge ...
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2answers
113 views

Is there any good research on daily technical indicators?

Question In short, I am looking for any academic research that deals with 'selection of features that changes on a daily basis' In other words, academic researches studying 'which technical ...
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1answer
150 views

Finding optimal trading of option on a foward

Assume you have a option on a forward $F$ with a payoff: $\max(F_T - K, 0)$. Assume also, that you have a bullish view on the forward in such a way that $E_{0}[F_T] > F_0 = E_{0}^{*}[F_T]$ (where ...
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104 views

how to avoid building a strategy that depends on very long trends

When I construct a strategy, it is easy to make subtle dependencies on trends that have existed for a long time. Sometimes it is legit to explicitly take advantage of the trends. For example, it has ...
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2answers
202 views

Are there any quant strategies which do not involve simultaneous buying and selling of two or more assets?

Whenever I read about quant strategies it leads me to stratergies which involve simultaneous buying and selling of two or more assets. Pairs trading, arbitrage, market neurtal or headging all these ...
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272 views

How to improve fitness and turnover in websim?

Well, I am new to quantitative finance.After reading a few things I started developing alphas on the websim platform by worldquant.Almost all the alphas I made had a decent sharpe(>2), but they ...
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1answer
82 views

Combine fundamental and market data into one ML model

What are the best tested ways to preprocess data with very different frequencies such as fundamental and market data into same ML model for quant trading?
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2answers
595 views

What are some beginner quantitative option trading strategies?

I'm new to quantitative trading, with good knowledge in finance and coding (mainly Python, Java, R, etc). I would like to know if there are any basic quantitative option trading strategies that can ...
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35 views

RUGARCH (output) and Residual Resampling using GARCH(1,1)

I try to replicate the methodology proposed by Freedman and Peters (1984a, 1984b) which was applied in the famous paper by Brock, Lakonishok and LeBaron (1992) to generate many artificial log return ...
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70 views

Can I make the simple moving average less lagging by this method?

I have (T+3) predicted prices for a stock. Let us assume that the predicted prices are going to be very close to the actual prices. can I alter the formula of simple moving average for 20 days like ...
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2answers
721 views

Quantitative strategies in the Fixed Income space

I'm looking to learn more about systematic strategies in the the fixed income space, particularly in Rates products (anything from simple cash to inflation or vol). I've been reading a couple of ...
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183 views

The “Universal Model” by Justin Sirignano and Rama Cont

In the nicely written article https://arxiv.org/abs/1803.06917 by Justin Sirignano and Rama Cont, they explained that their model is universal and stationary. I am a bit confused about some questions. ...
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107 views

Pairs trading strategy: Portfolio returns and NAV

Currently trying a pairs trading approach using cointegration. Tried both formations: $$log(P_t^A)=log(P_t^B) \hat{\gamma}+\hat{\mu}+\epsilon_t \hspace{0.5cm} (1)$$ $$P_t^A=P_t^B \hat{\gamma}+\hat{\...
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1answer
55 views

Question about inverse leverage etfs

https://www.math.nyu.edu/faculty/avellane/LETFSlides.pdf This shows that when that the inverse fund grows assuming zero volatility at $e^{r(1-b)}$ where $b$ is the leverage used and $r$ is the ...
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3answers
95 views

Which stock tick has its geometric asian call?

Many finance books introduce the pricing on geometric asian call/put options underlying black-scholes model, since its price has its explicit formula. I am not sure, if geometric asian option is ...