# Questions tagged [quantitative]

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### How to optimizer alpha signals when the estimated uncertainty of signal is known

Suppose we have the alpha signal $\alpha_i$ for a collection of $N$ stocks $i=1,2,...,N$. Typically, we will use $\alpha_i$ to construct our portfolio as $$P=\sum_i \alpha_i \cdot S_i$$ with $S_i$ ...
113 views

### Is there such a thing as resonance in economic underliers?

In physics the occurence of resonance is explained and widely understood in its linear form and subject to research in nonlinear resonance. Example for instance are resonant frequencies of objects. ...
163 views

### Differencing vs Detrending financial time series

I'm quite newbie to time series analysis and I have to understand what's the difference between differencing time series (i.e considering $Y_t= X_t-X_{t-1}$) and detrending (using linear regression ...
117 views

### Carry vs Roll-Down on a zero-coupon IRS

I am trying to understand the differences between carry vs roll-down on a zero-coupon interest rate swap. Lets say we have a 10 day ZC IRS, meaning we will only swap once on maturity. We are a payer ...
1k views

### Free or Relatively Less Pricey Quant Finance courses online

I am trying to figure out what all online Quant Finance courses are out there which are free or relatively less pricey? CQF is not less pricey Financial Engineering course on Coursera - Not so great ...
59 views

### Definition Of A Portfolio

I have very recently started studying quantitative finance on my own through a book called An Introduction To Quantitative Finance by Stephen Blythe. In chapter 6 of his book, he sets out to prove ...
52 views

### How should I interpret the (insignificant) coefficients of Fama-French 3-factor model?

I am writing a mid-term thesis on the Fama-French factor model. I have built 5 portfolios sorted by the Book-to-Market ratio. The first portfolio is the lowest-BM group and the last portfolio is the ...
35 views

218 views

### Magnitude of the Diversification Ratio

How would I interpret the magnitude of the Diversification ratio? I know that the higher the number, the better, but is 1.1 massively different that 1.2? For example a sharpe ratio of 0.25 is ...
73 views

### How can I reproduce the experimental verification of the “False Strategy” theorem plot?

I recently came across the following blog post talking about the importance of back-testing overfitting, and a plot claiming to be an experimental verification of the False Strategy theorem. The ...
105 views

### Questions related to Sharpe's return-based style analysis

I have been reading about Sharpe's return-based style analysis, which tries to determine the manager's exposure/effective asset mix to changes in the values of the asset classes. It does so by using ...
143 views

### Zipline issue with SPY data

I have written a strategy to backtest in zipline, and every time I ran the backtest, and error is showed with the line: IndexError: index 0 is out of bounds for axis 0 with size 0 After a bit of ...
446 views

### Quant teams predicting the World Cup

It is a good tradition of the quant teams of the major banks to predict the World Cup. As an example see this new paper from Goldman Sachs: The World Cup and Economics 2014 (Brazil will win by the ...
88 views

### Sigma moves - annualize return or no?

This might be a very simple dumb question. But when you look at a security's annualized volatility over a 3 year period, assuming the security has an annualized vol of 5% and the drawdown over three ...
113 views

### Using Normal Distribution to forecast active return

I wanted advice on how to go about forecasting active return via a standard normal distribution, The asset is a security with annual volatility of 6%. The benchmark is a 5% annual return with 0% ...
1k views

### What is time-varying risk premium? Forecasting stock returns

I am trying to understand the concept 'Time-varying aggregate risk premium'. Here is an extract from a Forecasting book, written by Rapach and Zhou, "However, rational asset pricing theory posits ...
81 views

### performance attribution - security selection= wB*(Rp-RB) or wP*(Rp-RB)?

Really confused. Finding various different ways of calculating security selection alpha. I believe it matters from whose perspective one is looking at. I am a portfolio manager and I want to know ...
254 views

### Bayesian strategy selection

I have N strategies/signals that I would like to allocate to. I want to estimate an estimate of future performance based off of recent realized performance (momentum of strategies per se - e.g. ...
116 views

### Explanation and Application of Quantile Regression of Value-At-Risk

Self-learner here. Please, excuse me if I am asking a Question already answered, but the explanations that I find online, just seem to be a bit hard for me. I am currently trying to apply the Basel ...
109 views

### How can we price an option taking into account the “issuer risk”?

I'm trying to take a closer look to option pricing in a risky environment. Let's say a firm $A$ sells me an (European) option on an underlying $S$ (which of course can be any other financial product ...
739 views

### Theoretical limits for contango and backwardation

What do you think would be the theoretical limit for contango? What about backwardation? This was asked in an interview. I am still not so sure about the answer.