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Questions tagged [quantitative]

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30
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2answers
5k views

Have Goldman Sachs Quantitative Strategies Research Notes been published as a book or a comprehensive collection?

Back in the 90's, Goldman Sachs (publicly?) released a series called "Quantitative Strategies Research Notes" — mostly technical papers on topic. Emanuel Derman co-authored almost all of them. Some ...
22
votes
8answers
4k views

What are some good technical and non-technical books for a math lover to get in to quantitative analysis? [closed]

To get the ball rolling... I will answer this question this evening For people aware & unaware I think it would be a great way to introduce the group, resources for fundamental knowledge & ...
19
votes
3answers
5k views

At what point does someone using technical analysis become a Quant?

Sorry if the question sounds rough. It's not my intention to devaluate something I've not yet understood like Quantitative Finance. So to keep it simple: is Quantitative Finance a science, like Math ...
12
votes
3answers
9k views

Can the Hurst exponent be greater than one?

Can the Hurst exponent be greater than one? Does it mean that the time series follows a random walk or that it's not stationary?
12
votes
2answers
515 views

Quantum Computing for Quantitative Finance

It's been a while that quantum computing is looked as the next step in computational science. I somewhat always tought we were decade aways from it's happening but it appears I was wrong: ibm-quantum-...
11
votes
1answer
14k views

Popular R packages for Quantitative Finance

Which R packages (in this list or not) do you use in quant finance, why not an alternative, do you use it in production and if so, how? There is a list of most of the R packages related to Finance by ...
9
votes
2answers
1k views

What are the main market anomalies/inefficiencies detected in quantitative finance?

I wondered about the existence of a complete list of the anomalies detected in quantitative finance. Generally, a market anomaly or inefficiency is a asset price and/or rate of return distortion on a ...
9
votes
4answers
831 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 ...
8
votes
1answer
670 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.
8
votes
2answers
395 views
7
votes
2answers
5k views

Quantitative Finance Programming Language

Since couple of weeks, I started to do my research on quant finance. During this time, I could discover a lot of stuff and with that stuff, a lot of questions came to my mind. A lot of news or ...
6
votes
3answers
489 views

Platform for Quantitative equity portfolio

What are the most popular platforms used for quantitative equity portfolio management/research? I've only used Barra so far for their factor models. Is there any specific feature or model you think ...
6
votes
2answers
433 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 ...
6
votes
1answer
374 views

The Heston Solution For European Option - Jim Gatheral

I have this equation (Eq. (2.4) "The Volatility Surface - A Practitioner's Guide" by Jim Gatheral (Ed. 2006)): $$-\frac{\partial C(v, x, \tau)}{\partial \tau}+\frac{1}{2}v \frac{\partial^2 C(v,x,\tau)}...
5
votes
2answers
613 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 ...
5
votes
2answers
3k views

How are momentum and reversion long/short strategies dynamically combined in trading?

I'm trying to understand how to combine two strategies dynamically in trading: one mean-reversion and the other momentum. One way (also the simplest one) of doing this is by scaling/normalizing ...
5
votes
1answer
3k views

C++ training from scratch to quantitative trading? [closed]

I have been trading for decades, and I have a solid knowledge of technical analysis but also VB as professional programmer. I would like to start learning C++ from scratch, then specialised in C++ ...
5
votes
1answer
2k views

Backtesting with fundamentals

Recently I've read some books about quantative approach to fundamental investing: - What works on Wall Street - James O'Shaughnessy - Quantitative Value - Wesley Gray, Tobias Carlisle - Quantitative ...
5
votes
1answer
856 views

Better understanding of the Datar Mathews Method - Real Option Pricing

in their paper "European Real Options: An intuitive algorithm for the Black and Scholes Formula" Datar and Mathews provide a proof in the appendix on page 50, which is not really clear to me. It's ...
5
votes
0answers
188 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. ...
4
votes
1answer
577 views

Black Scholes differential

I'm studying a BS derivation and I don't understand one part .We have a portfolio consisting of $\Delta(t)S(t)+B(t)$ where the first term is risky and the second is a riskless bond. The part i don't ...
4
votes
3answers
218 views

Who trades exchange options in practice (Margrabe's formula)?

I'm currently studying the pricing of the exchange option. https://en.wikipedia.org/wiki/Margrabe%27s_formula While I can appreciate the theory, who actually buys these options in practice? Are ...
4
votes
1answer
73 views

Barrier Option from binomial tree

What is the smallest information structure that is required for using the binomial tree to calculate the price of a barrier (up-and-in) option? My gut feeling is any node below the node that reaches ...
4
votes
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. ...
4
votes
1answer
242 views

Linear-Boundary Crossing Problem for Brownian Motion

This is a question I came across while reading: $W = (W_t)_{t\geq{0}}$ is a standard BM. Let $\mu\in \mathbb{R}$, and let $\tau_{a}^{\mu}$ = $\inf(t>0;W_t = a + \mu{t})$ be the first passage time ...
4
votes
2answers
890 views

How to deal with negative ARCH terms?

Lately I have been trying to fit a GJR-GARCH(1,1) model to fit against the S&P 500 returns over 1985-2015 but I have ran into some problems I can't quite figure out. The GJR-GARCH(1,1) model I am ...
4
votes
1answer
621 views

Does Matlab support exogenous variables in GARCH models?

Is it possible to introduce dummy variables or explanatory variables in the GARCH variance equation (garchset and garchfit) in ...
4
votes
0answers
105 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 ...
3
votes
4answers
312 views

Mark Joshi Quantitative finance numerical techiniques, writting an algorithm that produces a random variable

Background: I am preparing for interviews and I was told to try and answer as many problems in the Mark Joshi book as possible. Question: Suppose an asset takes values from a discrete set $v_j$ ...
3
votes
3answers
179 views

Why Central Bank carry out Qe when they can directly force banks to lower down the interest rate?

To boost the economy, the central bank can do it either by lowering down the interest rate nor carry out QE. But QE objective is to lowered the interest rate also so banks can give out more loan. This ...
3
votes
2answers
224 views

Fama and French (market premium) factor

Currently I am using the Fama and French 3 factor model to explain the performance of mutual funds using monthly returns from 2000 to 2017. I use two market proxies: (1) RM-RF, obtained directly ...
3
votes
2answers
459 views

ARMA-GARCH model, bset model selection and confidence levels calculations

I'm a newbie in GARCH models. I tried to realize ARMA(p, q)-GARCH(u, v) model via fGarch. So, 2 main questions. 1) Can I use BIC/AIC for selection best model for all (p, q)-(u, v) models? So, is it ...
3
votes
1answer
8k views

Hurst Exponent Calculation

I am trying to calculate the Hurst Exponent using Excel. I am facing a problem where the exponent value sometime goes beyond 1. Can someone share a link / material so that it will help me to calculate ...
3
votes
1answer
233 views

Monte Carlo model with multiple assets step by step

Here are the following steps to calculate Monte Carlo VaR. I am learning how to proceed with each steps and I would need somebody who can explain. Do I have to create only 1 vector in step 4 (even if ...
3
votes
2answers
934 views

How to find the best fitting GARCH model for a portfolio composed of 3 ETFs in R?

I am doing a project for my class Financial Time Series in which I am trying to forecast my portfolio log returns using a GARCH fit. I am having a bit of trouble determining the best way to fit this ...
3
votes
1answer
55 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. ...
3
votes
0answers
98 views

what is the minimum capital necessary for quantitative/automated/algorithm trading? [closed]

I mean from my home for myself I have a degree in statistics so I know time series, predictions, R ... I would like to design statistical model for trading with R I don't ask for trading strategies, ...
2
votes
3answers
3k views

What are some of the best quantitative finance websites? [closed]

Not looking to start a debate. Just want to learn more about the field and am looking for some websites with high quality, informative content.
2
votes
1answer
654 views

CAPM and factor modeling: Machine learning

Excuse my ignorance with this I am still trying to wrap my head around the interpretation of the Fama French 1992 factor paper. I come from a computer science background but I am interested in ...
2
votes
1answer
84 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 ...
2
votes
2answers
219 views

Common misconceptions in Quantitative Finance? [duplicate]

This question is motivated by my experience of meeting some markets professionals who claimed certain things about Black Scholes and option pricing. So I am wondering what are some of the common ...
2
votes
2answers
168 views

Monte Carlo Methods for Pricing Derivatives

can someone please suggest a good book on Monte Carlo Simulation for Pricing Derivatives? Don't want a book which is too complicated like a PhD level. A Masters level should be good. Thanks a lot in ...
2
votes
1answer
143 views

Fama French sorting

I am trying to calculate my own monthly fama french factors SMB and HML and I have a general question about a final screening act. I understand that to sort companies in june of year $t$ they need to ...
2
votes
1answer
150 views

Why Arent There Long Rate Models?

You have short rate models, https://en.wikipedia.org/wiki/Short-rate_model, but there doesnt seem to be any long rate models. I find this weird as in options modelling you model the whole smile, not ...
2
votes
1answer
108 views

minimum variance hedge with stochastic processes

Problem set up: asset S: $$\frac{dS}{S} = \mu dt+\sigma dz$$ Hedged using a forward contract: $F = F(S,t).$ Hedge portfolio: $$P = S+nF$$ I want to find the variance of $dP$, and then minimize that ...
2
votes
1answer
118 views

Calculating short/long order percentages?

I have a feed in real time that lists the ask and bid orders. Each order consists of a value and a quantity. I want to calculate the percentage of short orders from the total orders in terms of ...
2
votes
1answer
33 views

Deriving the long-horizon predictive regression and hypothesis testing

I am working on the long-horizon regression, $$y_{t,K}=\mu+\beta_1x_{1,t-1}+...+\beta_nx_{n,t-1}+e_{t} $$, where $$y_{t,K}=y_{t}+y_{t+1}+...+y_{t+K-1}$$ and there can be multiple x's. So I am ...
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(...
2
votes
0answers
58 views

Isn't a perfect economic system always in debt? [closed]

Let's say in a simple world, we have 3 persons, a banker, a businessman and a worker. Then we apply the current monetary system in this economy. So for the system to get started, we need a banker to ...
1
vote
2answers
4k views

Where can I find answers to questions in the book “Paul Wilmott Introduces Quantitative Finance”?

I'm currently answering the exercises at the back of every chapter of the book "Paul Wilmott Introduces Quantitative Finance" and would like to compare my answers to the correct ones. Tried looking ...