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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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relation between technical and quantitative [closed]

What is the relation between technical and quantitative analysis?I have found that most important plot in finance is not a technical analysis pattern, but a statistical distribution of Sharpe Ratios ...
quanity's user avatar
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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 ...
quanity's user avatar
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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, ...
Carol.Kar's user avatar
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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 ...
coboy's user avatar
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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 ...
Kavinkumar R's user avatar
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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 ...
helloimgeorgia's user avatar
2 votes
1 answer
213 views

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 ...
helloimgeorgia's user avatar
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1 answer
127 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 ...
snoreBore's user avatar
1 vote
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54 views

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 ...
Sane's user avatar
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1 answer
129 views

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 ...
Roland Kofler's user avatar
1 vote
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48 views

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 ...
QMath's user avatar
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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 ...
Valter's user avatar
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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 ...
Julien Maas's user avatar
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44 views

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 ...
NICOLÁS ZANNI's user avatar
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1 answer
183 views

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 ...
BeefJerky's user avatar
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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 ...
FoolAlex's user avatar
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3 answers
210 views

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 ...
user1276185's user avatar
2 votes
1 answer
199 views

How to design a strategy whose PnL is proportion to correlation?

I'm reading about this correlation breakout strategy, whose pnl is proportional to $$E[PnL] \sim (\rho_{1D} - \rho_{2D})\sigma_1 \sigma_2$$ where $\rho_{1D}$ is the correlation of daily returns, and $\...
user72415's user avatar
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Average time it takes to test a strike?

My question can be confusing so it’s better I explain it with an example. Let’s say I sell a strangle. That is with call at +27 delta and put at -27 delta. With 30 days to expiration. Is it possible ...
FawaMop's user avatar
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4 votes
2 answers
177 views

How would you approach this positive EV and high variance betting problem?

My friend was asked this question and I’m curious as to how people would play. There are 15 cards face down on a table. You can draw any number, n, of them at random. You only see the cards you have ...
User2331418's user avatar
1 vote
3 answers
332 views

Market Makers how can they sell an asset they don't have

I'm having trouble grasping the operations of market makers. For example, consider Bank XYZ, which has set a bid-ask spread for T-Bond A at $90.1 (bid) - 90.2 (ask)$. Suppose a client of the bank ...
hjkhkjhjk's user avatar
1 vote
1 answer
258 views

Trade Impulse signal

https://blog.headlandstech.com/2017/08/03/quantitative-trading-summary/ In reference to the link, under Market Microstructure Signals, the so called "Trade Impulse" signal was mentioned . ...
emptydoubleu's user avatar
1 vote
1 answer
260 views

Multi level micro price

Typical micro price formula uses the top of book depth (i.e. level 1 depth): Microprice = (BidSize x AskPrice + AskSize x BidPrice) / (BidSize + AskSize) But how does one actually include more depth ...
emptydoubleu's user avatar
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1 answer
257 views

Statistical Arbitrage, Avellaneda & Lee - Estimation of the Residual Process

I am trying to calculate the trade signal outlined in Avellaneda & Lee paper "Statistical Arbitrage in the US Equities Market". They describe their approach in appendix. Here is my ...
arkon's user avatar
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Combining many trading strategies in an efficient

I have a lot (>50) of back tested (and naively "validated") trading strategies. They trade different ETFs, mostly equities, but also others (like GLD, USO, ...). These are all strategies ...
user947967's user avatar
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0 answers
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Lopez de Prado Advances in Financial Machine Learning- entropy for adverse selection

In chapter 18: Entropy Features, Lopez de Prado discusses how entropy can be used to estimate adverse selection. He suggests a method where order imbalance is mapped to quantiles and entropy is ...
Cameron's user avatar
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Clustering of Maximum Drawdown Values in Monte Carlo Simulations (Jaekle & Tomasini example)

Hope this question isn't too naive. I've been trying to replicate the Monte Carlo method using sampling without replacement as described in the Jaekle & Tomasini book (Trading Systems: A New ...
djhanson's user avatar
1 vote
1 answer
235 views

Theta using black scholes when time to maturity approaches 0

When time to maturity tends to 0, like on expiry day, denominator $\sqrt t$ in becomes 0 and the first term in the formula becomes large enough to make theta of the contract more than its premium. How ...
PG1's user avatar
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0 answers
66 views

Combination of bid ask of two instruments

You have 2 instruments: X in which you are quoting 35 @ 40 and product Y in which you are quoting 15 @ 30. We want to make a market on the product X+Y. What is the bid-ask spread you will quote? Got ...
Kai's user avatar
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0 votes
1 answer
615 views

Options market making process (step-by-step)

What are the steps involved in options market making? Does it roughly follow this procedure: Choose a pricing model, e.g. Black-Scholes. Calibrate the model, e.g. Volatility. Quote a bid-ask spread ...
FISR's user avatar
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2 votes
0 answers
80 views

Variables for predicting price impact

Can anyone please recommend papers(other than Frazzini, 2017) that recommend market variables or any other predictors to model temporary price impact when you buy / sell a trade? This would fall under ...
Omni's user avatar
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1 vote
1 answer
107 views

How is Open Interest calculated?

(More specifically on crypto exchanges) If traderA opens 1 long and traderB closes 1 long, thus delta Open Interest is 0. Then what if traderA opens 1 long, and traderB opens 1 short, is delta Open ...
kpeteL's user avatar
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0 votes
0 answers
111 views

Relationship between holding time and sharpe ratio

Let's say, for simplicity, I have a long-only portfolio $P$ that consists solely of equity. The average holding period for each asset is $n$ days. Are there research papers or theorems that ...
hjkhkjhjk's user avatar
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1 answer
377 views

Difference Between Option market price and Theoretical price? [closed]

So I am working on strategies that depends on the difference between Actual market price of option and price derived using black and scholes model. For eg: Spot 19000 , strike 19200 . It is OTM call ...
Nikunj Guna's user avatar
2 votes
0 answers
120 views

Estimating Parameters of Optimal Posting Strategy from "Enhancing Trading Strategies with Order Book Signals"

I'm reading the paper “Enhancing Trading Strategies with Order Book Signals” by Cartea et al (2015). And I have the following questions: Assume that I empirically estimated $\lambda^{l}, \lambda^{\pm}...
envy grunt's user avatar
1 vote
2 answers
343 views

Expected slippage based on % of average daily trading volume

I have started a quant strategy that buys and sells thousands of stocks. Each trade represents <1% of average daily trading volume. On average, the trades represent around 0.1% of ADTV. What is a ...
helloimgeorgia's user avatar
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0 answers
81 views

In grid trading, is a fixed price level grid equivalent to a dynamic grid?

I am trying a grid trading bot that shifts the grid around the current market price within a minimum and maximum price. I lack context on how such strategy compares with a fixed grid centered around a ...
OneArb's user avatar
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Quantitative trading strategies with a focus on low-frequency dislocations

I am looking for references that are specific to quantitative trading strategies that exploit low-frequency dislocations in markets, which lend themselves as overlays for a strategic asset allocation ...
Hans-Peter Schrei's user avatar
5 votes
1 answer
2k views

What does EUR 5y2y-7y3y-10y5y mean?

In this research piece, one of the trades on Page 31 is Pay EUR 5y2y-7y3y-10y5y. What is the meaning of this notation? I guess it is a fly trade on three forward rates, but it is confusing that the ...
Bravo's user avatar
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0 answers
67 views

PCA 'unnormalize' weights

When computing a PCA on several prices, we usually normalize them first. Let's say I got the weights (eigenvectors) for the PC5. This weights are made from normalized prices. If I believe PC5 is too ...
Felipe Cancela's user avatar
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0 answers
208 views

trailing Stop Calculation for a strategy

I have converted pine script (UT-Bot by Yo_adriiiiaan) strategy to python but facing some errors. It requires TRA calculation and trailing stop calculation. Problem is that ...
user3696623's user avatar
0 votes
0 answers
96 views

Input/References on Generating Exit Signals for Positions that Profit Very Highly from Extreme and "Unpredictable" Events?

For focus, let us restrict the scope of this to vanilla options-based positions/strategies. In a lot of the accounts that I've seen of those that engage in this sort of investment/trading strategy (...
QMath's user avatar
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2 votes
1 answer
139 views

Is the Gittins index useful in determining when to change an investment/trading strategy?

I've been reading about multi-armed bandits and the explore/exploit trade-off that can be solved with dynamic allocation indices such as the Gittins Index Theorem. Could this be applied to when to ...
LattePrincess's user avatar
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0 answers
102 views

Any document about general backtesting algorithm and data structure

(Note there are similar questions, with different focuses at this forum, but my focus is more on the general concept, if any, about backtesting (for stocks) and sources of information where I can go ...
Dino Hsu's user avatar
1 vote
1 answer
181 views

Is there a risk-neutral measure if there are two stocks with different drift terms?

There are two stocks: $S_t$ and $P_t$ $$dS_t = S_t(\mu dt + \sigma dB_t)$$ $$dP_t = P_t((\mu + \varepsilon) dt + \sigma dB_t)$$ Is there any risk-neutral measure? My thoughts are pretty simple: $μ$ is ...
nearhome's user avatar
3 votes
0 answers
77 views

Methods for tracking option open interest intraday

It is my understanding that open interest option values on financial websites are a reflection of a snapshot value each day. Is anyone aware of methods for estimating intraday open interest, or aware ...
skepticalforever's user avatar
3 votes
1 answer
392 views

Proper way to backtest strategy using bootstrap method

Should I back-test in a single (original) price series and bootstrap the strategy returns to get statistics of interest? Or should I create bootstrapped price series using bootstrapped returns from ...
Arun Lama's user avatar
2 votes
1 answer
302 views

How to compare algorithmic trading strategy risk/reward performance? [closed]

I am setting up different algorithmic trading strategies with varying performance characteristics. I am new to this. The strategies vary greatly with their aggressiveness. I would like to find a way ...
Mikko Ohtamaa's user avatar
2 votes
2 answers
246 views

Is there a commonly accepted way to leverage the granularity of high frequency data while working within the constraints of lower frequencies?

Apologies if this is not the correct forum for this question. Access to high frequency data (trade data, quote data, limit order book updates, etc.) is currently relatively easy through various public ...
QMath's user avatar
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2 votes
0 answers
123 views

Linear Regression Cointegration Strategy

When doing linear regression to figure out the hedge ratio for the cointegration relationship what does it mean if the residuals are stationary but end up looking like the price time series of y? How ...
Deepankar Joshi's user avatar

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