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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Online sources for quantitative finance research

What are the sources one can search for or view / download research articles and other publications on quantitative finance in addition to the Internet search engines?
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50 votes
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How much data is needed to validate a short-horizon trading strategy?

Suppose one has an idea for a short-horizon trading strategy, which we will define as having an average holding period of under 1 week and a required latency between signal calculation and execution ...
Tal Fishman's user avatar
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How are cryptography and speech recognition technology applied to forecasting financial markets?

One of the answers to my previous question regarding the strategy of Renaissance Technologies, there was a reference to The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly ...
vonjd's user avatar
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28 votes
8 answers
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How to design a custom equity backtester? [closed]

I was thinking about writing my own backtester and I realize I have to make some assumptions. So I was hoping I could post what I am planning on doing and hopefully some of you can give me some ideas ...
user667's user avatar
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37 votes
4 answers
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What types of neural networks are most appropriate for trading?

What types of neural networks are most appropriate for forecasting returns? Can neural networks be the basis for a high-frequency trading strategy? Types of neural networks include: Radial Basis ...
phoenix1886's user avatar
26 votes
1 answer
3k views

How do different methods and techniques used in pairs trading compare?

I was going through the paper of Avellaneda (2008) on stat arb and I found it interesting that he uses asset returns vs. their respective ETFs to compute the s-score. I am wondering if anyone has ...
silencer's user avatar
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18 votes
7 answers
13k views

Switching from Matlab to Python for Quant Trading and Research

Has anybody else out there made this switch? I'm considering it right now. What were the negatives and positives of the switch?
Rich C's user avatar
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17 votes
4 answers
4k views

What is the ideal ratio of in-sample length to out-of-sample length?

Suppose you are running a portfolio of quantitative strategies and that you develop a new potential strategy to be added to the mix. Assume for simplicity that the new strategy is independent of the ...
Tal Fishman's user avatar
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13 votes
2 answers
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The Definition(s) of Momentum

I am currently studying the Momentum strategy and its differences in results (returns) when we change the formula describing momentum. There are indeed no accurate formulas for implementing the ...
Pierre's user avatar
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8 votes
3 answers
9k views

How to compute the alpha decay of a strategy?

How can one compute the alpha decay of a systematic trading strategy?
Belmont's user avatar
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8 votes
2 answers
4k views

Is there a non-recursive way of calculating the exponential moving average?

I want to calculate the exponential moving average for many stocks in a large investable universe. To do this, I've seen the following formula: Because it references the previous day's exponential ...
user1953907's user avatar
4 votes
5 answers
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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 ...
user1129988's user avatar
27 votes
3 answers
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What are the best sources for equity quantitative research?

What are the best sources of quantitative finance research in equities? I will list a couple and note an asterisk if the research is available by request (i.e. non-clients) or online: BAC-Merrill ...
26 votes
5 answers
9k views

Proof that you cannot beat a random walk

There is much speculation to what degree financial series are random (and what kind of randomness prevails). I want to turn the question on its head and ask: Is there a mathematical proof that ...
vonjd's user avatar
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26 votes
3 answers
8k views

Papers about backtesting option trading strategies

I am looking for all kinds of research concerning option trading strategies. With that I mean papers that publish results on different option trading strategies properly backtested with real-world ...
vonjd's user avatar
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23 votes
2 answers
8k views

Regime-Switching Model for detecting market shifts

I'm always wondering whether anyone has utilized regime-switching models successfully in forecasting or trading. Academia has long discussed this topic in-depth, such as using Regime Switching ...
Simon's user avatar
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19 votes
2 answers
5k views

How can I learn about the quantitative aspects of market making in illiquid single stock options?

I would like to learn more about the possible ways of doing quantitative research regarding option market making. In particular, while the mainstream index option market may be very liquid, the ...
Soham's user avatar
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18 votes
4 answers
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HFT: What is the big differentiator in comparison to other time scales?

High Frequency Trading (HFT) seems to be the big money making mystery machine these days. The purported source of unlimited floods of gelt pouring into the investment shops using it. For me, HFT is ...
vonjd's user avatar
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18 votes
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From a high frequency point of view, with a price prediction and assuming infinite leverage, how do you determine optimal trade size?

I have read about something like Kelly criterion for long term expectation maximization assuming a fixed starting bankroll. But if one can assume unlimited leverage, and one has a signal for a price ...
Palace Chan's user avatar
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12 votes
2 answers
15k 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 ...
jod51's user avatar
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12 votes
3 answers
2k views

What is the expected return I should use for the momentum strategy in MV optimization framework?

As all research on the momentum strategies are focused on the indicator, i.e. the entry point, there seems not much discussion on its expected return? Though there are some discussions on the exit ...
Jason's user avatar
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12 votes
5 answers
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How to properly evaluate backtest returns?

Do you evaluate a strategy in a backtest based on the cumulative returns generated by the strategy (i.e. looking at the cumulative returns of the trades that occur) or do you start with a certain ...
silencer's user avatar
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10 votes
5 answers
2k views

Is Visual Basic a fast enough for millisecond orders

I have an API that for an order routing platform that is in visual basic. The maximum frequency or orders to exchanges will be milliseconds, where the underlying systems are expected to be able to ...
CQM's user avatar
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10 votes
2 answers
3k views

How long do algorithmic trading strategies typically remain profitable?

As I understand it, an algorithmic trading strategy could lose profitability, if, for example: it's rediscovered by others employee turnover leaks the strategy to others market conditions change ...
MWB's user avatar
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9 votes
2 answers
912 views

What is a reasonable upper bound on the performance of a daily trading strategy?

I am backtesting an equity trading strategy which trades only once per day. Is there a general rule of thumb for the reasonable upper bound on the rate of return of such a strategy? For example, a ...
monksy's user avatar
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8 votes
1 answer
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Can momentum strategies be quantitative in nature?

I have read some papers on quantitative trading strategies and it seems like strategies that focus on mean reversion or statistical arbitrage give signals that are dependent on some quantitative model....
silencer's user avatar
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8 votes
5 answers
1k views

Indicators and research for stress-based investment strategies

In reference to this paper: Can risk aversion indicators anticipate financial crises? and the investable UBS Risk Adjusted Dynamic Alpha Strategy: http://www.ibb.ubs.com/mc/strategyindices/ubsrada/...
vonjd's user avatar
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6 votes
2 answers
8k views

How to understand micro-price (aka, weighted mid-price)?

The definition of micro-price is S = Pa * Vb / (Va + Vb) + Pb * Va / (Va + Vb) where Pa is the ask price, ...
olivia's user avatar
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6 votes
2 answers
3k views

Interpertation of delta hedge error in Black Scholes

I have spent some time to prove the delta hedge error as described in this paper paper page 16-17 by Davis. The proof is discussed here Deriving Delta Hedge error in the B-S setup (part 2) (a post by ...
Sanjay's user avatar
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5 votes
5 answers
1k views

Physical commodity trading quantitative risk return model

I am very new to commodities, I was previously in portfolio management/optimization (Black Litterman Markowitz etc). I am now a Buy-Sell analyst for Petrochemicals, and need to understand the basic ...
El_1988's user avatar
  • 193
3 votes
3 answers
4k views

backtesting options strategies in R

I would like to backtest an options strategy in R. I require the ability to delta hedge and rebalance to options in the portfolio at different frequencies (daily, monthly,etc.) What packages are the ...
Alex's user avatar
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3 votes
1 answer
499 views

Is that a good way to work with the ARMA model?

I would like to share with you what I am doing to get your point of view, and to make a better trading system in collaboration. I am working on EURUSD forex, and I am trying to find a way to place ...
David Hoareau's user avatar
2 votes
1 answer
900 views

Algorithmic Trading [closed]

I am a novice when it comes to algorithmic trading with strong interest in the subject matter. As I am looking around for online courses, I can only find one course called Algorithmic Trading ...
user2079170's user avatar
1 vote
2 answers
616 views

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? ...
Dylan Kerler's user avatar
1 vote
0 answers
120 views

Physical trading spot transaction analysis-Quantified

ref to my previous question here: Physical commodity trading quantitative risk return model I am currently new to commodities and physical trading. I have currently narrowed down my area of analysis ...
El_1988's user avatar
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1 vote
2 answers
290 views

Questions on continuously compounded return vs long term expected return

I have reading a paper from Oliver Grandville on long term expected return. I am trying to reconcile what I am reading in that paper vs what I see under "Application to Stock Market" in Kelly ...
qwer's user avatar
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1 vote
1 answer
76 views

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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-1 votes
1 answer
230 views

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 ...
user avatar
-1 votes
2 answers
473 views

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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