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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Scaling in and out of a strategy [closed]

I have developed a fully automated crypto trading strategy for which has been showing promising results and I am now looking to raise money to expand and hopefully trade to its full capacity in the ...
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Reduce risk by adding a hedge when trading on two listings/order books (virtual exchange) [closed]

I am new to the world of financial derivatives and in my master's introductory course we are supposed to implement different trading strategies on a virtual exchange. The assumptions are as follows: -...
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Replicating Dispersion Trade with Vanilla Options

I'm studying dispersion strategies and would like to know if one can replicate a payoff of dispersion with a strike as per below (e.g. a basket of 10 stocks and strike = 19%) with vanilla options. ...
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Optimal leverage for short-only crypto strategy

I have the following strategy Instrument : crypto pairs (50 coins) short only ,Markets : spot and futures (isolated margin account margin sell (for spot) and futures on Binance) ,Frequency : ~5-10 ...
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Bootstrap Reality Check - Why does it only assess the best trading strategy?

I wonder why White's BRC only determines whether the best trading strategy is statistically profitable. What prevents us from comparing the average V of the second best strategy (i.e. square root of ...
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Where to find someone to work on quant trading strategies together?

I work on designing quant and mix of quant+fundamental trading strategies, but find it is really unproductive to do it at home by myself, and looking to find someone who to do it together with. I've ...
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Steepener strategy valuation 2s10s

Believing US bond yield curve is going to steepen, I want to profit. My idea is to sell 10y bond and buy 2y instead. Example: I buy 10m 2y and sell 2m 10y (10x2=2x10) 10y-2y spread rises by 10bps, how ...
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Is not handling irregularity (unevenly spaced time intervals) in stock market intra-day data ok?

I read papers and it seems not doing anything to unevenly spaced time series is the implicit common sense (apart from routine preprocessing, which has nothing to do with time interval handling) for ...
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How to construct portfolio from monthly strategy that unwinds one year later?

In Rebonato and Hatano, The Economic Origin of Treasury Excess Returns: A Cycles and Trend Explanation (May 23, 2018) SSRN, there's a monthly long/short strategy that is only unwound after 1 yr. So ...
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Should we include constant in linear regression in pairs trading?

Should we include constant in linear regression while calculating hedge ratio for pairs trading strategy?
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Martingales and Arbitrage in Multiperiod Securities Markets

I have been reading the paper "Martingales and Arbitrage in Multiperiod Securities Markets". The paper works in the probability space $(\Omega, F, \mathbf{P})$. $X$ is defined as the set of ...
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can Soft Actor-Critic reinforcement learning algorithms be used in real-time trading?

I am scratching my head with an optimization problem for Avellaneda and Stoikov market-making algorithm (optimizing the risk aversion parameter), and I've come across https://github.com/im1235/ISAC ...
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How to backtest a strategy with irregular in-out signal?

Hi I'm currently backtesting an event-driven strategies. Unlike factor strategy which has a regular rebalancing interval, event-driven strategy is conducted whenever there is an event. Since we do not ...
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Differences vs ratios

High, I am working on an exercise which involves performing a regression analysis to predict market direction (e.g. up or down). I am using daily OHLCV data. I've created various factors from the ...
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Time series strategy versus cross section strategy?

Suppose we have a universe of $n$ stocks, and for each time period $t$ we have $n$ predictions for their future returns. Now we can calculate the information coefficient for our predictions in two ...
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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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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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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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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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