26
votes
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What mathematical theory is required for high frequency trading?
Hah! There is no such thing as the “rigorous mathematical underpinning” of high frequency trading - because HFT, like all trading, is not primarily a mathematical endeavour.
It’s true that many ...
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18
votes
What mathematical theory is required for high frequency trading?
I would argue, taking a note from John von Neumman, that quantitative finance lacks rigorous underpinnings. Von Neumann warned in 1953 that many things that look like proofs in economics and finance ...
- 4,359
18
votes
What are the recent quantitative finance papers we should all read?
Rough Volatility
Gatheral, Jaisson and Rosenbaum (2018, QF) further popularise a stream of the literature which emphasises the non-smoothness of volatility paths. These models build on a fractional ...
14
votes
Accepted
open problems in mathematical finance
If you want to address interesting problems that are interesting for financial mathematics, I do not believe you have the good list.
Pricing.
For instance, most of explicit formulas for pricing that ...
14
votes
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Why are there so few published research papers that apply Deep Learning to Algorithmic Trading?
I would say that most ML methods risk overfitting and it depends very much on the asset class. The only area where more sophisticated ML methods such as deep learning appear to make a major difference ...
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10
votes
What are the most crucial research areas currently in quantitative finance/interesting subfields?
The most pressing topic in the interest rate world is the modelling of the New RFRs (SOFR, SONIA, ESTR etc) as part of the IBOR transition. New products are being developed, models for pricing these ...
10
votes
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What are some currently open problems in market microstructure
They are a lot of open problems in market microstructure. To have an idea of the whole landscape, have a look at Market Microstructure in Practice, 2nd Edition, by L and Laruelle.
I would split them ...
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10
votes
Who hedges (more): options seller or options buyer?
Your question comes at this correctly, in my opinion. There is indeed a buyer and a seller behind every option; but the hedging behaviour of the two need not be equivalent...
I used to work in an ...
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10
votes
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Online sources for quantitative finance research
Below are some of the sources one can use to search for and view or download research articles and other publications on quantitative finance (QF). Many include non-peer-reviewed articles in their ...
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9
votes
What are the most crucial research areas currently in quantitative finance/interesting subfields?
As far as empirical asset pricing goes, there occurs to be a replication crisis, similar to other social sciences. Many published results, factors and anomalies cannot be replicated, others don't hold ...
8
votes
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Is there a website that lists replication code of financial papers?
http://replication.uni-goettingen.de/
(The below text was added by Jan Höffler who founded the wiki.)
This site is a replication project for papers, so far mainly in economics but open to any field....
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7
votes
Accepted
Shannon's entropy for financial times-series (return)
What you need is more mutual information rather than Shannon entropy. It is dedicated to capture the influence of one variable on another (you can think about it as a non linear version of Pearson ...
- 11.5k
7
votes
What are the recent quantitative finance papers we should all read?
Rates options
Lognormal vs Normal Volatilities and Sensitivities in Practice: this is the best paper on pricing Rates Options in negative rates environment that I have read recently (disclaimer: I don'...
6
votes
What are the most crucial research areas currently in quantitative finance/interesting subfields?
The application of machine learning to enhance the prediction or forecasting performance of financial models using historical data-driven algorithms (like boosting, support vector machine) has been ...
5
votes
What are some classical papers to read for a mathematician looking to get into quant finance?
The field is in flux right now. Since you are at the master's level I think you should focus on more general works in mathematics. If you were my student and we were ignoring specific things such as ...
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5
votes
What are the most crucial research areas currently in quantitative finance/interesting subfields?
Research into leveraging machine learning to speed up models seems to be gaining traction. This can be useful in computationally-expensive problems such as Greeks for products valued through Monte-...
4
votes
Any research on how natural language processing can be used to forecast stocks?
Recent research
A recent article by Frank Zhao is interesting to get started: Natural Language Processing - Part I: Primer.
You will find more papers on this repo (too long to copy all here): ...
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4
votes
What concepts are the most dangerous ones in quantitative finance work?
Ignoring to account for possibly omitted variables
Ignoring to account for possibly omitted variables has arguably lead to both of the severe problems below:
The fall of the US mortgage market in ...
4
votes
Intraday data frequency
I think the answer is driven by asking yourself a few questions :
If you are a practitioner at what frequency are you able to trade and want to trade ? (you are limited by this so no need to go to ...
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4
votes
Is there anywhere I can read the paper, "The Gamma-Vanna-Volga Cost Framework for Constructing Implied Volatility Curves"
It was a Deutsche Bank Working Paper: http://refhub.elsevier.com/S0304-405X(16)00005-2/sbref0001 Unfortunately, it is very hard to find internal research published by banks. I have not seen this one ...
- 12k
4
votes
What are the biggest new advancements in the field of quantitative finance in the last 10 years?
So to answer your point about ML, I would say yes, it is starting to get a foothold in finance. However, this is in the sense that it starting to be more applied in a particular context. What I mean ...
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4
votes
Undergraduate research topic in options
This question will probably get closed soon, but I'll take a stab at answering anyway.
I think, for an undergraduate, an interesting topic would be the FX-credit hybrids, that is, FX options (or even ...
- 12k
4
votes
Who hedges (more): options seller or options buyer?
It's not really a question of buyers vs. sellers, but of investors vs. market makers.
Market makers (market making firms, or banks - for whom this holds doubly due to regulation limiting their ...
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3
votes
Accepted
Value measures other than P/B
I think a very good paper that summarizes the empirical evidence on other measures of value is the Lettau and Wachter (2007). Take a look at their tables 1, 2 and 3 for the most standard uses of value ...
- 8,062
3
votes
Historical Volatility vs Implied Volatility Performance in Pricing Options
There is a lot of literature on the predictive power of IV - HV signal on detla hedged straddles for example. Where HV could be a variety of historical measures. I think there is a goyal and soretto? ...
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3
votes
Accepted
Index and alpha strategies research analyst
It is a very broad statement that just means that you would research and document the performance of fixed income strategies of two kinds: those that simply follow an index (passive strategies) or ...
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3
votes
Market risk stress testing?
One of the easiest ways is described in Duffie, Pan (1997) "Bootstrapped Simulation from Historical Data" p.55.
$R$ is the set of all risk factors (a time series)
$C_{norm}$ is the Covariance Matrix ...
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3
votes
What is an appropriate hedge ratio for hedging a credit instrument with equity of the same issuer?
One way to approach this is to use a structural credit model which links the price of debt and equity.
To start with, you may wish to consider the JP Morgan / Deutsche Bank Credit Grades model which ...
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