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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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 ...
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472 views

Basics of trading strategy development

I am Computer engineer and I know programming in python, go-lang, C++, I am interested in trading, I know how to make system to get data, send orders, back-test, fault-tolerance system, etc I have ...
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Would this extremely simple strategy make money?

Find a diversified set of financial instruments by whatever method you like. Every day, buy each instrument at the open price. Historically, the open price is almost never the high. Sell immediately ...
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2answers
947 views

Covariance between two stocks in a two-factor model

I am studying the Arbitrage Pricing Theory using Pairs Trading: Quantitative Methods and Analysis.In page 44 the author gives an example on how to calculate the covariance between two stocks. I will ...
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1answer
357 views

approach on trading algorithm using machine learning [closed]

let's say I am supervising a algorithmic trading project using machine learning. I don't have involvement in the technical side but am involved in the high level planning. the style is likely ...
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1answer
3k views

Binomial tree vs trinomial tree in pricing options

Very new to pricing models. Is there a general guideline when to use binomial tree and when trinomial tree is preferred? As far as I know, unlike binomial tree, trinomial tree only gives a range ...
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2answers
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How to incorporate fundamental analysis in quantitative trading algorithm? [closed]

I want to write a quantitative stock trading program based on fundamental analysis. It would crunch through prices, financial reports to look for value stocks. It can support backtesting of strategy ...
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1answer
4k views

Learn backtesting using MATLAB

What are some good ressources (books, articles, ...) to learn backtesting of investment strategies using MATLAB ? It can be strategies related to fixed-income, equities, derivatives, ... whatever. ...
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1answer
494 views

Option order imbalance

Currently studying the paper: HU, Jianfeng. Does Option Trading Convey Stock Price Information?. (2014). Journal of Financial Economics. 111, (3), 625-645. Research Collection Lee Kong Chian School ...
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1answer
777 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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1answer
222 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 ...
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1answer
754 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 ...
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Capital Allocation for Portfolio of Multi-Strategy and Multi-Instrument

I would like to know if there is a way (or theory) to manage a multi-strategy, multi-instruments portfolio that would calculate the optimal weight to allocate capital for each combination of strategy ...
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1answer
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What is “signal” in quant investing?

Can somebody explain (and give examples) of "signals" in quant investing? What are those? What does this word mean?
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1answer
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Markowitz portfolio in reality

I am in academia and begin to work on topics including portfolio optimization. I just read lots of paper discussing different extensions to the Markowitz approach, given different (possibly ...
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1answer
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The “Universal Model” by Justin Sirignano and Rama Cont

In the nicely written article https://arxiv.org/abs/1803.06917 by Justin Sirignano and Rama Cont, they explained that their model is universal and stationary. I am a bit confused about some questions. ...
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259 views

Lagged Residual as Independent Variable

I am building a factor model to estimate future equity returns. I'd like to include an autoregressive residual term in this model. I'd like to have yesterday's error (the difference between yesterday'...
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2answers
3k views

How to optimize return in a moving average crossover algorithm

Moving average crossover strategy is a widely used strategy in algo trading. Is there a way to optimize return in a moving average crossover stratergy. I have used this site to backtest MA crossover ...
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1answer
221 views

forecasting trading costs with end of day data

I am trying to create a model that forecasts trading costs (using end of day data, so no intra day data). My trading cost (also called Implemented Shortfall (IS) is defined as such for a single stock, ...
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Cointegration trading: Ignoring pairs that aren't economically related

Cointegration trading question What's the state of the art when it comes to choosing proper subsets of stocks/assets where cointegrating relationships aren't ignored as (likely to be) spurious? For ...
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1answer
113 views

Exposure/Factor Analysis on a loan portfolio?

I am working on performing factor analysis on a loan portfolio. This is my understanding so far, and I was hoping that some of the smart folks here might be able to chime and guide me through this ...
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2answers
335 views

How to trade a Ratio?

I came across a ratio plotting of Corn And Soybeans contracts, notice it's in a historical low, an intuitive question came to my mind, how should I trade this ratio (or relationship)? It's unlike flat ...
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2answers
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What are some quantitative trading strategies used by high-frequency trading companies to make a killing on a market crash day on 24Aug2015?

http://blogs.barrons.com/focusonfunds/2015/08/24/high-frequency-trading-firms-just-made-a-killing/ Virtu Financial (VIRT), the high-speed trading firm that went public earlier this year, was one ...
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What features does q /KDB provide for HFT use?

It appears q/KDB is being using for Time series analysis for HFT. What are some of the advantages of using ...
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4answers
817 views

portfolio diversification tester

Are there any online tools (optionally with developer API, to spare me the scraping) that given an existing portfolio, calculate how well a new candidate position would score to increase combined ...
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0answers
117 views

Machine learning - assigning a value to each tradable moment

I've been looking at machine learning trading strategies for some time and realized recently that I've been neglecting a very important part of the equation in terms of training an effective model. In ...
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Backtesting: what happens to real-executed order if mine fills instead?

I'm writing a backtester and using an order-by-order Nasdaq ITCH feed whilst testing it. Let's say the bid-ask spread is 100 @ 9-11 @ 100 My strategy inserts an bid order for 100 @ 10 and this ...
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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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222 views

Assets cointegration: optimal inventory for futures market

I'm interested in HFT cointegration stratagies, and recently found interesting article "Algorithmic Trading of Co-Integrated Assets" The article describes mean-reversion strategy for N-assets. ...
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0answers
124 views

How does one simulate intraday strategies which don't end up flat at the close?

I ran into this trying to simulate trading interlisted names between the NYSE and the TSX. Depending on my strategy parametrization it would sometimes end up with a significant short or long dollar ...
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390 views

Calculating index arbitrage

I have a days-worth of level 2 market data. I am calculating S&P500 index arbitrage. I have a few questions about the calculation: 1) Should I be summing all the bids and asks from the stocks ...
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1answer
335 views

Doing opposite of what the model says

Is it considered a viable trading strategy to do the opposite of a consistently losing model? That is, whenever the model says short, you go long, and vice versa. Disclaimer: I would never do this. ...
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2answers
375 views

What is the reason for using log prices in Pairs Trading (Cointegration)?

I was wondering, why some of the research papers on pairs trading (using the cointegration approach) are using log prices to determine the spread of a pair? Why are they not simply using regular ...
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2k views

Does QuantConnect use both bid and ask data for backtesting?

Or Quantopian? How about Python libraries like ultrafinance and PyAlgoTrader?
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What are the best [free]resources to learn C++ particularly for quantitative finance?

What are the best free, online resources to learn C++ for quant finance? The course by quantnet seems too expensive for a broke student like me! If there are any free online resources, let me know! ...
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1answer
515 views

DB quant research

I'm trying to find DB quant research papers in "Signal Processing" series - particularly interested in "Signal Processing: The options issue" (2010). Would appreciate if anyone could share it.
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302 views

Short volatility strategy using strangles

For a short volatility strategy using option strangles, is it better to target a fixed premium to earn? Or a fixed vega? Objective is to maximise the return/risk (sharpe) of the strategy. Any help ...
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3answers
3k 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 ...
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2answers
1k views

Distribution for High Kurtosis

Can you please advise which distribution to follow when your skewness is 0.28 and Kurtosis value is 51. Since it's leptokurtic and positively skewed I would like to fit distribution and also wanted to ...
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1answer
12k views

Seagull option strategy - clear example

It looks like the subject of seagull option strategy is not as clearly explained as for other strategies (butterly, bull,bear spread). Thus, can someone provide a clear example of what you buy and ...
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2answers
237 views

Can alpha be positive if cumulative returns underperform the benchmark?

According to my portfolio analysis program (pyfolio), the alpha of the following strategy is .17 (I am assuming 17%). [Based on pyfolio documentation, alpha here is the "annualized alpha".] ...
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1answer
380 views

How to orthogonalize Fama French factors?

The Fama French factors (e.g. size, value) are not orthogonal to each other, so when e.g. you want to create a diversified portfolio of factor mimmicking portfolios (factor investing), the correlation ...
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1answer
159 views

Finding optimal trading of option on a foward

Assume you have a option on a forward $F$ with a payoff: $\max(F_T - K, 0)$. Assume also, that you have a bullish view on the forward in such a way that $E_{0}[F_T] > F_0 = E_{0}^{*}[F_T]$ (where ...
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2answers
2k views

Quant Interview Course [closed]

I there any course on for quant that covers all the factors such as logical reasoning, puzzles, statistics, probability, time series analysis, portfolio management, options, machine learning, and ...
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1answer
445 views

Scaling (Data prep) & Feature selection for the financial Data for LSTM Models

Overview I'm training an index e.g. FTSE100, where I have 8 years of past data (daily). I also have a list of its constituents. For each stock, I have the following features: ...
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1answer
365 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 ...
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1answer
3k 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 ...
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2answers
1k views

How to select optimal betting strategy from backtest?

I have written a model for predicting the winner of UFC fights. My model calculates the probability of each fighter to win a given match. I have back tested the model and found it to be very ...
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1answer
121 views

Question about calendar spread mean-reversion strategy

I'm excited to ask my first question here! I'll try to describe the mean-reversion strategy with some background, then explain what I couldn't understand. The strategy is described in Earnest Chan's ...
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1answer
197 views

Are momentum returns negatively skewed?

In the academic literature, I found that momentum returns are negatively skewed (e.g. Daniel and Moskowitz, 2002). As far as I understand, this usually happens when the "past losers" rebound ...

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