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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112 views

pca for yield curve

I used Principe component analysis on yield curve data this was the result ...
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64 views

How to properly hedge a short vol taking into account hedge stop loss?

Suppose a short straddle. In practice, hedging with long/short futures exposes to the risk of hitting a stop loss when market movements are wide. Eventually, it may very well happen that the hedge ...
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328 views

How to improve fitness and turnover in websim?

Well, I am new to quantitative finance.After reading a few things I started developing alphas on the websim platform by worldquant.Almost all the alphas I made had a decent sharpe(>2), but they ...
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91 views

RUGARCH (output) and Residual Resampling using GARCH(1,1)

I try to replicate the methodology proposed by Freedman and Peters (1984a, 1984b) which was applied in the famous paper by Brock, Lakonishok and LeBaron (1992) to generate many artificial log return ...
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123 views

Pairs trading strategy: Portfolio returns and NAV

Currently trying a pairs trading approach using cointegration. Tried both formations: $$log(P_t^A)=log(P_t^B) \hat{\gamma}+\hat{\mu}+\epsilon_t \hspace{0.5cm} (1)$$ $$P_t^A=P_t^B \hat{\gamma}+\hat{\...
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60 views

Correlation between a sector and MSCI ACWI returns

I have daily return data of 11 sectors of MSCI World Index and the MSCI ACWI index. I want to know the stationarity of correlations between the sectors and MSCI ACWI index. This is what I have done: ...
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56 views

How to make use of sector index returns data to analyze the overall stock market index

I have a set of indices returns data, namely, ...
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79 views

Probability of outlier events for laplace distribution

I've read that the laplace distribution is better for forecasting purposes than the normal distribution due to it better accounting for fat tails. However, when I run the numbers in matlab, laplace ...
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44 views

How are Risk indices linked to Physical Trading returns?

Ref to my previous question here: Physical trading spot transaction analysis-Quantified I have been able to narrow down my aim to defining a physical trading strategy P&L. My question is, how ...
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40 views

Trading rules: Controlling the portfolio FDR+ level

I'm trying to apply the FDR+ (False Discovery Rate +) methodology from Bajgrowicz (2011) link another_link. I have computed the p-values with the stationary bootstrap as they did, however I am not ...
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80 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 ...
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31 views

Dynamic counterpart for model tunneling/optimization using past data

When we tune a model to optimize parameters for a strategy using past data, even if controlling for overfitting (checking out of sample performance) and refreshing the analysis from time to time, we ...
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185 views

How to mathematically compute the volatility range of each stock?

I joined a stock market group and in this stock group, there is a proprietary "daily trading range (or DTR)" that the founder uses. However in order to do this for all the hundreds of stocks in the ...
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65 views

Equivalent of Force Indicator Within Ta-lib

Is there any equivalent of the Force indicator (http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:force_index) within the talib library? (...
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67 views

Name of an indicator based on price change and volume

If a(t) is the price of an asset and v(t) is the transaction volume of that asset against say USD, one can look at the integral over a time period of v(t) a'(t). In words, this is the cumulative ...
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118 views

Investment Bank VWAP Execution ranking

Is there a ranking of Investment Banks institutional VWAP execution algorithms anywhere (who beats the benchmark price most consistently and by how much)? Thanks
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56 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'...
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263 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 ...
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153 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 ...
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63 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 ...
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105 views

Real Time/Historical weather data

I am looking to incorporate weather data into my algorithmic models. What is a good source to find historical + real time weather data by zipcode or region? Any help will be appreciated! Preferably an ...
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201 views

ISM PMI data - sector trend through ranking and seasonal decomposition

I have monthly data for each of the 18 sectors in the ISM PMI. Each datapoint shows the trend of a sector: growing, contracting or neutral. It also tells the strength of that trend with a number: "...
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97 views

Calculating Asset Returns

The question pertains to a simple phenomenon. There is gold futures listed on Exchange A and Exchange B. Exchange A and Exchange B overlap times with A and B starting 8 hours later and A and B ...
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125 views

How to make the algo decide over a optimal selling point?

Please don't bully if its a basic question.Kinda new to the topic hence experimenting. Problems to construct trading algorithm.For the example I assume I am getting a buy signal from the DMI/ADX ...
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138 views

Straddle neutral strategy

What does it mean to implement a delta-neutral strategy for straddle ? A straddle consists in buying a call and a put simultaneously, at the same date, on same underlying, with same maturity and ...
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73 views

Correct term for position accumulation relative to price?

I've been looking at various accumulation algos and it appears that the greater majority are predicated on building a position largely relative to a time component or market volume for obvious reasons....
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384 views

Models for volatility estimation of high frequency data?

I have read on several news articles and research papers, "Contrary to popular belief, high frequency trading reduces volatility in stock markets rather than exacerbates it". Do you know the models ...
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1answer
292 views

What does NPV ASSENTED after stock name mean?

For a project, I have to quantitatively implement a strategy for value investing in EURO STOXX 50. I pulled the data from Datastream. When I was checking some data plots for dividend yields and total ...
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2answers
715 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 ...
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21 views

Harvesting Bond Term Premium and Roll Yield using curve plays with Oanda Continuous Contracts

Oanda has their own product pricing and method of rollover that stitches the futures contract prices. I was trying to implement a strategy that accesses the bond term premium and roll over yield for ...
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29 views

Extreme and rare events affecting the market

There are extreme events affecting the high-probability [short-term] market such as lowering interest rates that rocket stock prices, even though such events are rare and the market's response can be ...
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16 views

Multivariate combinatorial purged cross-validation

Combinatorial purged cross-validation (CPCV) is a technique for backtesting strategies while purging and embargoing observations in a time series. CPCV improves upon classical k-fold and walk-forward ...
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120 views

How do you formulate trading ideas and strategies?

I have access to some tick data and Bloomberg data. Outside of data mining and hoping to find an economic rationale after the fact, what do you usually do to generate ideas before you look at the ...
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53 views

What are the best metrics to evaluate an ML algo backtest, other than the nominal returns?

I have designed an algorithm that uses Support Vector Machines to classify the next day's price movement for several prominent cryptocurrencies on a ...
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59 views

USING HIDDEN MARKOV MODEL TO DETECT MARKET REGIMES IN R

How can I use a hidden Markov model to detect different regimes within AAPL's returns using the R programming language . If anyone can point me to any papers or links which can help me out that would ...
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31 views

Sizing a beta neutral Pairs trading with an allocation limit

Hopefully a simple one for someone. I've a pair of stocks A and B. The beta adjusted spreads tell me I need to be selling A and buying B, my beta for B is 1.5, so in order to get a beta neutral pair ...
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1answer
99 views

Generating buy/sell signals in pairs trading

I'm reading a quantitative trading book"Quantitative Trading with R" by Harry G. In the pairs trading section, there's an example that creates the spread and generate buy/sell signals. y and x are ...
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45 views

Correct labelling for trading strategies

In trying to build a ML powered trading strategy, one of the most important tasks is to correctly label the data so that the results of whatever classification algo you are using will be properly ...
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56 views

Probability and random walk

Let's says i have 10 years of daily prices on a stock ABC. I do some analysis and I realise that, for example, if the stock increases 5 days in a row (close > open), 75% of the time, the 6th day will ...
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26 views

How to calculate technical indicator using tick data cross the night?

The tick data shortly before the close in yesterday have different statistics and charasterices compared to the tick data shortly after the open in today. Then, how I calculate the indicators using ...
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40 views

Evaluating Markov switching garch models with R

Hello I have been working on a Markov switching GARCH model my intention is to use it to trade options volatility . I have created a Markov switching garch model using the MSGARCH package in R and in ...
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63 views

Can a publicly known gap trading strategy be profitable and if so why?

Newbie to this field, please forgive any lacking knowledge... There is various literature (example) on trading according to strategies which assume that (in the absence of a large gap, or major news) ...
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71 views

How effective is simplex projection for portfolio sizing? How is Euclidean projection different?

I am looking at a backtesting framework where the authors do a simplex projection to get final long-only weights. They also have a version with Euclidean projection to simplex. I wanted to understand ...
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48 views

Vexing issues to be aware of fitting volatility smile

I wanted to know what one should be aware of trying to fit volatility smile. Besides the arbitrage issues. What are some of the real life vexing issues associated with this process. What is a non-...
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56 views

Option arbitrage on two correlated or cointegrated underlying assets

If two indices are highly cointegrated, does it allow for some set of statistical arbitrage strategies for european options for which those indices are single underlyings ? Does answer change if ...
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80 views

Can I make the simple moving average less lagging by this method?

I have (T+3) predicted prices for a stock. Let us assume that the predicted prices are going to be very close to the actual prices. can I alter the formula of simple moving average for 20 days like ...
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66 views

Constrained Optimization for performance attribution

I am trying to perform constrained opmitization for portfolio performance attribution analysis. Specifically, I am trying to determine the impact of sectors performance on the S&P 500 index. Min ...
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54 views

Significance of Data

The following is a result I get from a pair trading model. I am trying to figure out the significance of the below but failing. Can someone help me out i.e. a resource or possibly an explanation on ...
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39 views

measuring the performance of round-trips on stocks

can you provide me with some ideas to assess the profitability of round-trips? That is when I buy 100 shares of IBM at 10\$ and I resell them two days later at 11\$, how can I measure the profit made? ...