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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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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Python SVM Model Implicitly Dropping Samples From Training Dataset [closed]

I have a 2D Training dataset with 23 samples. There are 6 true positives in the dataset and 10 true negatives. The data passed into the SVM is of shape (23,2) but the support_vectors_ actually used ...
5 votes
1 answer
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Meaning of cross sectional rank

This paper mentions the concept of rank which is defined as cross sectional rank. For e.g. one of the alphas (#3) is (-1 * correlation(rank(open), rank(volume), 10)) 10 is just the number of days ...
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1 answer
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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 ...
1 vote
2 answers
10k views

Calculating the returns of a long/short strategy

I feel like an idiot asking this but i haven't found the answer anywhere. I have backtestest a paris trading strategy, while calculating the returns of the strategy I run into some problems when the ...
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0 answers
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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. ...
4 votes
5 answers
8k views

Appropriate method for calculating negative returns on a trading strategy?

I have a cumulative profit/loss time series below for a trading strategy, what is the appropriate way to calculate the returns in percentage for such a series? My issue is the appropriate ...
0 votes
1 answer
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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) ...
2 votes
1 answer
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What are the "sniffing" or "stalking" algorithms?

I was looking for all the sorts of trading algorithms used in stock market and I came across the so-called "sniffing" algorithms. However, the explanations of this concept I found are very ...
1 vote
1 answer
256 views

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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1 answer
216 views

Steps to fit a Machine learning model for prediction of up and down market movement

I have around 5 years of data of an index containing many features on a daily basis. I want to classify whether the index will move up or down the next trading day (up or down movement is determined ...
6 votes
4 answers
538 views

Why do anomalies disappear after they get detected?

In financial markets, anomalies refer to situations when a security or group of securities performs contrary to the notion of efficient markets, where security prices are said to reflect all available ...
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0 answers
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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 ...
19 votes
2 answers
3k views

How to build a regime-switching model which knows its own limits?

In recent months I've come to the conclusion that there are not only certain regimes in the markets (like bear or bull) but phases where all models fail because we are in uncharted territory. The ...
2 votes
1 answer
346 views

Known mispricing opportunities only available for small traders

Warren Buffett has famously said that he could generate 50% annual returns if he was working with small sums of money. (He cannot move the needle enough now with large amounts of capital). Perhaps two ...
3 votes
0 answers
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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 ...
7 votes
1 answer
278 views

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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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 ...
2 votes
2 answers
2k views

Historical tick data level 1 and level 2

I am a software engineer and want to run some simulation of over historical market data . I am pretty new to finance and trading world. To automate some of my strategies I would like to run some back ...
1 vote
1 answer
86 views

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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0 answers
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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 ...
0 votes
1 answer
204 views

Are there better performance measures for mean-reverting vs trend-following trading strategies?

The Sharpe ratio is often used as measure to assess risk-adjusted returns of trading strategies. However, there are also other measures that can be used to assess risk-adjusted returns like the ...
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1 answer
135 views

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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2 answers
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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 ...
0 votes
1 answer
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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 ...
4 votes
2 answers
1k views

Ed Thorp Wilmott Articles

I've been really enjoying Ed Thorp's autobiography, and it makes me want to revisit some of his old Wilmott articles, listed here: http://www.wilmottwiki.com/wiki/index.php?title=Thorp,_Edward ...
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1 answer
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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 ...
3 votes
1 answer
336 views

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 ...
0 votes
1 answer
300 views

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_{...
0 votes
2 answers
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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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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 ...
0 votes
1 answer
218 views

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 ...
1 vote
2 answers
260 views

What's the optimal way to size a limit order?

Say Bob wants to buy \$30 million worth of APPL stock at a price of \$130. He decides to use a limit order. But posting a $30 million limit order would drive the price up and prevent him from being ...
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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,...
1 vote
0 answers
112 views

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 ...
4 votes
1 answer
285 views

evaluating garch models

I used ugarchroll to backtest my garch model on S&P returns this is my code ...
1 vote
0 answers
120 views

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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111 views

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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79 views

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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0 answers
73 views

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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0 answers
52 views

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 ...
12 votes
2 answers
14k views

How to calculate Sharpe Ratio from $ returns?

I have a pairs strategy that I am trying to calculate the sharpe ratio for. Currently I am using python for my analysis and calculation. I have a dataframe that contains the cumulative returns in $'s ...
1 vote
0 answers
35 views

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 ...
1 vote
2 answers
223 views

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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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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0 answers
51 views

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, ...
10 votes
3 answers
10k views

What is the best alternative of Quantlib library

We need to build a Fixed Income Portfolio Risk Analytics solution. Somehow due to administrative reason we can't use Quantlib which is written in C++, even call it through SWIG via JNI. We have tried ...
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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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