4

Servers co-located at exchanges for the purposes of low latency algo trading would primarily listen to the exchange's feeds. The feeds would generally be disseminated via multicast on a fibre network. Certain exchanges charge a proximity fee based on the length of the fibre to the trading server and others make all the fibre cables equally long. The feeds ...


2

The Sharpe Ratio and Information Ratio are not equivalent, be careful there. I don't have Grinold & Kahn handy but I believe that it matches the contents of the CFA Curriculum which I have at hand where $\mathrm{IR}$ is defined as $$\mathrm{IR} \approx \mathrm{IC} \sqrt{\mathrm{BR}}$$ The relation really is only approximate as in my opinion it is a ...


2

You can define information ratio on ex-ante basis, so you will be using the expected values, and this definition is called alpha omega: $IR=\frac{\alpha}{\omega}$ Let’s represent the risk reversion by $\lambda$ then the value add is: $VA=\alpha-\lambda \omega^2$ Substituting for alpha: $VA=IR \omega -\lambda \omega^2$ Now the value add is maximised ...


2

With apologies for lowering the tone of your well framed question, but my casual interpretation from a major credit risk project (2003-2005) indirectly advised by Siddiqi, was that the IV > 0.5 "suspiciously high" bracket was a crude sanity check flag that the predictor had an unnatural relationship with the response possibly caused by (basically) mistakes ...


1

I explored this topic some time ago and I wrote an informal review on Medium. You can find my article here. In a few points: Tick Imbalance bars are just the simplest application of information driven bars and we should build on that (rather than take its details too seriously) to uncover interesting insights. I believe Marcos Lopez De Prado has just ...


1

I will try to be as concise as possible. For obvious reasons, if you do not have any trades, choose the quotes, because they reflect the intention of a player to trade at that level of price/implied_vol at a certain point in time (where we have no trades because those quotes are not matched by other traders). If instead you have a quote and a trade ...


1

It's a little dependent on whether its listed or otc options but your question about implied volatilities probably addresses the issue the best. I would calculate the implied volatility from the real transactions noting whether its a buy or sell and then do the same for the markets that you are seeing and compare them depending on what the market has done ...


1

You should use average monthly return over stddev.


1

I don't think any of the current answers, answer the question, there is one metric that dominates all of them and that is simply the t-stat of the factor. This is well shown across academic literature as well. The rule of the thumb here is to use a t-stat greater than 2.


1

There is no such thing as number of independent bets when one is betting on a common random factor as we quants usually do. Grinold & Kahn’s formula is only relevant when the factor payoff is a constant over time. This is not interesting in practice. When the factor payoff is random, then Ding and Martin The Fundamental Law of Active Management: Redux (...


1

The CFA institute defines "material" information as information that would change the price of a security if it was released or that a reasonable person would want to know before making an investment decision. Non-Public information is information that is not available to the general public. That could include information that was released to only a select ...


1

According to this video there are basically four kinds of messages available in the feeds: Order is added to the book Order is removed from the book Execution of an order displayed in the book Execution of an order not displayed in the book The speaker goes on to say that these messages are sufficient to reconstruct the publicly available market ...


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