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).

Filter by
Sorted by
Tagged with
2
votes
0answers
60 views

Reduced rank / matrix factorisation techniques and their uses in portfolio optimisation?

I am interested in reduced rank / matrix factorisation techniques and their uses across finance and portfolio optimisation. For example, PCA might be used to reduce the number of components you are ...
3
votes
0answers
387 views

Can a stat arb alpha be a global macro alpha?

In academic literature, "statistical arbitrage" is opposed to (deterministic) arbitrage.[1] In deterministic arbitrage, a sure profit can be obtained from being long some securities and short others. ...
1
vote
0answers
50 views

Flow Variable and Stock Variable

I am new to stochastic control and I need your help! Suppose that we are a trader and we are trading based two sources of signal. One comes from the stock's flow of dividends as well as another trader'...
1
vote
0answers
216 views

Quantitative Strategy on Variance Swap (master thesis)

I am doing a master thesis on Variance Swap and my dear friend told me I could find some valuable help on the "Quantitative Finance Stack Exchange". I would like to apologise beforehand, if my ...
5
votes
2answers
810 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 ...
2
votes
2answers
627 views

pairs trading, normalization

I am interested in implementing a simple pairs trading strategy using two correlated futures contracts. I am unsure what the best way to normalize the prices of the two instruments is. Essentially ...
-1
votes
1answer
462 views

How to use exponential smoothing for trading?

I was wondering if there's a rule of thumb regarding the value of alpha used when performing exponential smoothing. I plan to use this technique to preprocess my data before feeding them into my ...
3
votes
0answers
120 views

reconstruct LOB from NASDAQ ITCH -how to handle market price order

I am trying to reconstruct the limit order book from the NASDAQ Historical TotalView -ITCH data. After I decode the raw data, I can successfully generate whole messages flow from ITCH data. However,in ...
1
vote
1answer
508 views

Example of delta one products

Not sure if this is the right place to ask such question. How close to 1 should the delta be in order for the product to be classified as delta one. 2.What examples of delta one products are there?
2
votes
0answers
331 views

Trading strategies for increased realized volatility

Suppose once every 2-3 weeks I have a way to select a few equities that are likely to exhibit higher realized volatility in the future month (relative to the past month). Historically, the average ...
1
vote
0answers
2k views

Improvement of Alpha Expression [closed]

I'm newbie user of Websim (websim), given Alpha Expression : (est_eps * (cashflow/sharesout) * (est_sales/sharesout))/est_dividend_ps Settings-Region:USA, Universe:TOP3000, delay:1,MAX stock weight :...
1
vote
1answer
88 views

What instruments help me receive a premium?

Apart from selling options , what other instruments can I trade(sell) to collect a premium ? The main problem that I face is as follows : I am buying a Call option which I would like to fund by ...
1
vote
1answer
108 views

Finding robust regions of multidimensional parameter combinations in trading strategies

Trading strategies often have many degrees of freedom. As a toy example let's say you have two moving averages (MA) which trigger a trade each time they cross each other: There are at least two ...
3
votes
1answer
528 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 ...
1
vote
1answer
3k 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 ...
1
vote
1answer
188 views

How to identify a change in market dynamics?

As a beginner, I'm learning how to make good trading strategies. One of the things to consider for reliable backtesting is the Minimum Backtest Length, whose selection is basically a tradeoff: Too ...
1
vote
1answer
281 views

Simple Sharpe Ratio Question Related to Trading Strategy

Given a price vector $(p_1,p_2,...,p_n)$ for some stock, then the corresponding return at $k$th day is described by $$ R_k = \frac{p_{k+1} - p_k}{p_k} $$ On the other hand, let $W_k$ be wealth at day ...
1
vote
2answers
285 views

Making a Trading Strategy Industry-Neutral

Here's a toy example of a simple trading strategy that I just read about (from a book called "Trading Alphas"): Let's say that we expect a stock that's been going up over the past week to now go down,...
1
vote
1answer
129 views

Currency/Forex Hedging using Momemtum Strategy

Mainly the two ways I could find on currency hedging are using forwards (to lock in a future exchange rate) and options. However, I'm curious whether currency can be hedged via some commonly known ...
1
vote
0answers
118 views

Self financing strategy : how to understand it in continuous + transaction cost model?

I'm having a hard time trying to understand a formula about self financing strategy trading. Let's suppose you have two assets, $\phi=(\phi_0,\phi_1)$ is the vector that represents the quantity you ...
1
vote
1answer
454 views

Computing the profits for a simple trading strategy (Backtest)

I have developed a trading algorithm, surprisingly simple in nature (I did start off with grand plans of applying Machine Learning to this problem as I am a data scientist by trade). I would place ...
-1
votes
1answer
422 views

Trading strategies for illiquid markets [closed]

Is there any literature on trading strategies for illiquid equities markets, such as research papers or articles? I've done some searching but haven't turned anything up.
2
votes
2answers
953 views

Does QuantConnect use both bid and ask data for backtesting?

Or Quantopian? How about Python libraries like ultrafinance and PyAlgoTrader?
4
votes
0answers
1k views

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 ...
2
votes
1answer
351 views

Interpretation of Open Interest for Options

Please define Option Open Interest, its interpretation, and why it matters? From my understanding, option open interest describes the net of long-short outstanding call or put options. But I do not ...
2
votes
0answers
80 views

Trading rules from automated search

I after talking to a research fellow, researched about trading rules from automated search. I found in the book Finding Alphas by Tulchinsky a general chapter, ...
-1
votes
1answer
586 views

pair trading cointegration - calculating shares quantities traded, portfolio value and returns

I have a trading strategy based on the cointegration of X and Y where beta derived from the regression is 0.7. My initial capital to invest is 1000. My understanding that the quantities of X and Y to ...
2
votes
3answers
835 views

Cointegration pair trading - how to test a trading rule using Monte Carlo?

I am doing a research exercise where I have two price series $X_t, Y_t$ which I regress against each other and test for cointegration. Once I confirm that they are cointegrated (using CADF or ...
1
vote
2answers
986 views

Test statistical significance of a trading strategy

I have created a trading strategy which operate every single day on the DAX 30, for the last 1700 trading sessions (some years). I have the daily returns of my strategy and also the daily returns of ...
3
votes
1answer
233 views

Should a backtester have ability to run multiple strategies simultaneously?

At the moment the backtester has a portfolio; a portfolio is associated with one strategy. The backtester is used to test different strategies one at a time, giving their return, Sharpe, drawdown. But ...
3
votes
1answer
162 views

Do high dividend yield stocks generally outperform the market?

The only paper I could find is the following: Dividend Yield Strategy in the British Stock Market 1994-2007 by Brzeszczynski et al. (2008) It states that a portfolio of stocks with high dividend ...
1
vote
0answers
151 views

How to calculate implied borrow rates from option chain information?

I am given information about a ticker with following options data: stock price, date, expiration date, strike price, call / put indicator, style (American or European), ask price, bid price, mean ...
18
votes
0answers
505 views

Questions on Kelly criterion

I am new to asset allocation problems and have some concerns regarding the derivation of the continuous-time Kelly criterion (i.e. not the original version destined to discrete sports betting/Casino). ...
4
votes
2answers
238 views

Regression coefficient and basic trading strategy

This question might be very basic but still I couldn't really find a satisfying answer anywhere. I want to analyse the effect of a repeated event (data release) on the price of a specific asset (I ...
2
votes
1answer
121 views

What does an optimized portfolio really tell us?

I am very new to this field, and have very recently started doing some self study on this topic. After reading some papers and reproducing some of the results in them, I am not very clear about what ...
1
vote
0answers
60 views

Account for empirical relationship between signal and market data

I have two monthly time series : one is a 'signal', on which I will base my decision to buy or short-sell, and the second one is the time serie of a given asset's price. I have implemented this ...
4
votes
1answer
509 views

Selection of optimal backtesting parameters

Suppose I backtest some strategy on in-sample data while varying two parameters, say $X$ and $Y$. $X$ can take the values $\{3,6,9,12,15,18\}$ while $Y$ can take $\{10,15,20,25,30\}$. I want to select ...
1
vote
0answers
38 views

Toxic FX Flow - how to avoid it [duplicate]

So, basically i want to debate and find out the real reason behind being flag by ECNs and venues as "toxic". How to avoid being flag? What kind of strategies are toxic and why? Below is an article ...
2
votes
0answers
354 views

cointegration strategy

If it can be proved that two time series $$S_t^1=\alpha + \beta S_t^2 + \xi_t$$ representing stocks are correlated, with $\beta=-2$ and then are proved to be cointegrated, how a portfolio should be ...
2
votes
3answers
2k views

How to get historical fundamental data in Bloomberg suitable for backtesting?

I'm trying to retrieve historical stocks fundamental data from Bloomberg to backtest some quant ideas. I'm having trouble to find the correct point in time the data was available. For instance, the ...
5
votes
3answers
878 views

Simple Moving Average Backtest: Cumulative Return too high

I apologize if this is way too basic a question, but I'm an absolute beginner to trading and am in the process of learning the fundamentals. Currently I'm trying to model a (10-day) SMA backtest in ...
2
votes
0answers
1k views

Finance Projects in Python [closed]

I am new to this forum. I work in the Market Risk Domain at a leading Investment Bank. I am currently learning Python. And the best way to learn is to experiment with some Real Live Analysis/Project(...
1
vote
0answers
370 views

FX Statistical Arbitrage Strategy [closed]

I have had experience creating stat arb strategies for equities and etfs, but haven't dabbled much into FX trading. I was wondering if anyone knew any resources online they would suggest, or could ...
0
votes
1answer
6k views

Replication strategy of European call option

So the question asks: L et $S(0) = 120$ dollars, $u = 0.2$, $d = −0.1$ and $r = 0.1$. Consider a call option with strike price $X = 120$ dollars and exercise time $T = 2$. Find the option price and ...
1
vote
1answer
226 views

Kfold cross validation: how to handle hold-out periods

I want to backtest a strategy using K-fold cross validation. Assume I have a period of 300 days in my backtest. I divide it into 30 folds of 10 days each. On day 1 of a fold, I enter a trade, and ...
3
votes
1answer
186 views

Using Market Gamma to Predict FX Trading Environments

I want to test a hypothesis about using gamma to predict FX movements. Suppose that market makers will seek to be delta neutral given their portfolio of FX options. At any given time, market makers ...
1
vote
0answers
178 views

Optimal approach for finding a profitable trading strategy to automate? [closed]

I am currently searching for an optimal approach for finding profitable forex trading strategies to automate. Currently, I just try to combine various indicators and build an automated trading system ...
2
votes
0answers
63 views

Literature to Learn about Different Instruments

What is a good source of literature to learn about the specifics of various instruments that are traded? For example, suppose I wanted to know more about MBS's, i.e. how exactly they are securitized, ...
7
votes
3answers
465 views

What is smart beta, alternative index, factor investing?

What is smart beta, alternative index, factor investing? Are they basically the same thing? Construct a benchmark index using schema other than market cap?
2
votes
1answer
2k views

How necessary is real analysis and complex analysis for trading at hedge fund levels?

As the title states, I am basically wanting to know the applications of real/complex analysis in finance. How important are such high levels of math ? I can obviously see how things such as ...