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Spread trading (market making) often requires placing and canceling a lot of orders. You have to buy and sell nearly simultaneously, so you need to move orders pretty often to beat other traders. But I would like to optimize my strategy, minimizing the number of orders placed while maximizing the total volume of dea... |
One of the greatest achievements of modern option pricing theory is finding corresponding dynamical trading strategies in linear instruments with which you can replicate and by that price derivative instruments; of course the most prominent example being Black Scholes and dynamic hedging.
I wonder concerning another... |
Techniques to optimize the placement of orders in market making strategy? |
Market making often requires placing and canceling a lot of orders. You have to buy and sell nearly simultaneously, so you need to move orders pretty often to beat other traders. But I would like to optimize my strategy, minimizing the number of orders placed while maximizing the total volume of deals. Otherwise I ... |
I trade on local exchanges in Europe, but my HFT strategies needs S&P 500 data (ES). I don't need to trade ES, but I need real time data and I want to have it as fast as possible.
I've tried http://www.zen-fire.com/ and it works fine, but probably something better exist?
Or probably (just probably..) I can use an... |
I have some market data (daily time series) for bond prices and CDS indices and I would like to generate synthetic versions of these which are statistically "similar" for testing trading strategies. Is there literature on this subject? |
In terms of pricing, Zen-Fire seems to be the best "retail" solution. But as you said, you need to be faster, so you can try some faster and more serious options:
1. [QuantHouse][1] - CME's Level 1 market data will cost you around 1500 Euros per month. They have points of presence in most local financial centers in... |
I need suggestions for some good books on the following topics:
- Credit Value Adjustment (CVA) / Credit Risk
- Probability of Default / Loss-Given-Default / Exposure-At-Default modeling
Any pointers on good research papers? I would prefer anything from after the 2008 crisis.
|
Recommendation for a book on CVA/Credit Risk and PD/LGD/EAD modeling? |
You can cancel out, theoretically, all risk with dynamic hedging.
Then you earn the "risk free rate of return".
Why would you make such a portfolio when you can simply buy a bond
that earns you "risk free rate of return" ?
|
Why Dynamic Hedging? |
The question is inspired by yesterday's (06/09/11) historic announcement by the Swiss National Bank that it would impose a ceiling on the franc of 1.20 against the euro.
I would like to know if there are any standard models to value currency options and quantos when the currency exchange rate is effectively capped b... |
When holding vanilla options, you can cancel out, theoretically, all risk with dynamic (delta) hedging. Then you earn the "risk free rate of return".
Why would you make such a portfolio when you can simply buy a bond that earns the "risk free rate of return"?
|
Why hold options when you can dynamically replicate their payoff? |
I'll just add that with Interactive Brokers you have to be aware of their cancel fees. Remember, Interactive Brokers owns Timber Hill, a very large and active market maker. They will discourage you from competing with Timber Hill through momentary disincentives, among other things.
For example, if you send a directe... |
I'll just add that with Interactive Brokers you have to be aware of their cancel fees. Remember, Interactive Brokers owns Timber Hill, a very large and active market maker. They will discourage you from competing with Timber Hill through momentary disincentives, among other things.
For example, if you send a directe... |
I know you mentioned that you already know about Yahoo's ability to do this. However, I thought I'd add the following snippet on how to do this with Yahoo. It's a trivial HTTP Get, and is likely the quickest and easiest way to get the information you're after:
> curl "http://download.finance.yahoo.com/d/quotes.c... |
You might find the paper ["Low-Latency Trading"](http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1695460) by Hasbrouck and Saar useful. In it they discuss the episodic nature of some high-frequency flow and construct some useful measures of this flow.
Generally, I would think some model that relates the cancel ra... |
I trade on local exchanges in Europe, but my HFT strategies need S&P 500 e-mini futures data (ES). I don't need to trade ES, but I need real-time data and I want to have it as fast as possible.
I've tried http://www.zen-fire.com/ and it works fine, but probably something better exist?
Or probably (just probably..... |
The defining characteristic of "high-frequency" is not the number of trades, but instead it is the number of orders you place, and in particular how often you are changing those orders. The scratch rate (cancel/fill ratio) is often very high. For every 1,000 orders you place, you might get 5 fills. This is the single m... |
Is the Interactive Brokers API suitable for hft? |
What tools exist for order book analysis and visualization? In particular, if one wanted to examine a limit order book and understand how it changes throughout the day where would you turn for software help? I've not found anything off the shelf, but I'm curious if others in this community might know of something. My p... |
What tools exist for order book analysis and visualization? In particular, if one wanted to examine a limit order book and understand how it changes throughout the day where would you turn for software help? I've not found anything off the shelf, but I'm curious if others in this community might know of something. My p... |
What tools exist for order book analysis and visualization? |
Naively, it seems that Bayesian modeling, structural models particularly, would be quite useful in finance because of their ability to incorporate market idiosyncrasies and produce accurate probabilistic estimates.
The down-side of course, is model-brittleness and extremely slow computational speed. Has the Quant c... |
How useful is Markov chain Monte Carlo for quantitative finance? |
The paper ["High Frequency Trading and The New-Market Makers"](http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1722924) by Menkveld will likely have information that will be interesting to you.
The paper breaks down the activity of one HFT in a European market. It provides statistics such as the # of trades, capi... |
MCMC can be used for Bayesian inference of other models with hidden variables. Gibbs sampling, for example, is used in Hidden Markov Models. Here is a [paper][1] that discuss the differences between MCMC and the more classical approach using the EM algorithm.
The question is: Are HMMs a useful model in finance? Some... |
I hear a lot about Q/kdb+. I've never had the opportunity to use it for anything real but have played with it using their trial license and found it intriguing (if not somewhat mind warping). I've seen a few references to the [J language](http://www.jsoftware.com/) which is also a derivative of APL [according to Wikipe... |
Can the J language be used as an effective alternative to Q/Kdb+? |
I hear a lot about Q/kdb+. I've never had the opportunity to use it for anything real but have played with it using their trial license and found it intriguing (if not somewhat mind warping). I've seen a few references to the [J language](http://www.jsoftware.com/) which is also a derivative of APL [according to Wikipe... |
I am seeing a regression model which is regressing Year-on-Year stock index returns on lagged (12 months) Year-on-Year returns of the same stock index, credit spread (difference between monthly mean of risk-free bonds and corporate bond yields), YoY inflation rate and YoY index of industrial production.
It looks thu... |
I hear a lot about Q/kdb+. I've never had the opportunity to use it for anything real but have played with it using their trial license and found it intriguing (if not somewhat mind warping). I've seen a few references to the [J language](http://www.jsoftware.com/) which is also a derivative of APL [according to Wikipe... |
How did your test of arbitraging Oanda's continuous interest versus other FX broker's rollover go? I ran a similar test before and found it did not overcome the spread costs, although starting on Wednesday (triple pay day) helped, the weekend interest at Oanda would catch up.
There are other ways of trading this ... |
I am seeing a regression model which is regressing Year-on-Year stock index returns on lagged (12 months) Year-on-Year returns of the same stock index, credit spread (difference between monthly mean of risk-free bonds and corporate bond yields), YoY inflation rate and YoY index of industrial production.
It looks thu... |
As far as I know MCMC and also (PMCMC) can be usefull for (bayesian) estimation of parameters of some Hidden process like in the Heston Model case based on observations of the Stock (filtering). But the problem here is that those estimates are not matching those based on calibration of vanilla options of the Risk Neutr... |
How does left tail risk differ from right tail risk? In what context would an analyst use these metrics? |
How does left tail risk differ from right tail risk? |
I am learning about quantitative finance, and I am struck by how different it is from the techniques that make it into magazines and TV, particularly technical analysis. Specifically, if they say an indicator (RSI, TRIX, etc.) can predict even short term future prices, then you should be able to run some analysis to s... |
How can I quantitatively test the validity of momentum indicators? |
Does the debt load of a company have an impact on the stock price of a company and its volatility? Also, how does the market react to the announcement of a company issuing bonds? |
Does the debt load affect the volatility of equity? |
Let's start with an empirical test of the relationship between leverage and stock price returns and see if this connects to corporate finance theory.
Below is a bivariate chart that show the one-year forward return of a security. The x-axis is the leverage characteristic "Total Liabilities to Total Assets" in the c... |
Let's start with an empirical test of the relationship between leverage and stock price returns and see if this connects to corporate finance theory.
Below is a bivariate chart that show the one-year forward return of a security vs. leverage. The x-axis is the leverage characteristic "Total Liabilities to Total Ass... |
Let's start with an empirical test of the relationship between leverage and stock price returns and see if this connects to corporate finance theory.
Below is a bivariate chart that show the one-year forward return of a security vs. leverage. The x-axis is the leverage characteristic "Total Liabilities to Total Ass... |
Let's start with an empirical test of the relationship between leverage and stock price returns and see if this connects to corporate finance theory.
Below is a bivariate chart that show the one-year forward return of a security vs. leverage. The x-axis is the leverage characteristic "Total Liabilities to Total Ass... |
Let's start with an empirical test of the relationship between leverage and stock price returns and see if this connects to corporate finance theory.
Below is a bivariate chart that show the one-year forward return of a security vs. leverage. The x-axis is the leverage characteristic "Total Liabilities to Total Ass... |
How does one calculate the implied liquidity of a specific option contract given a set of vanilla puts and calls with various strikes and maturities on a single underlying? |
How do you calculate the implied liquidity of an option? |
What do you think of strategies displayed on [timelyportfolio.blogspot.com][1]?
I really like the fact that there is some code to reproduce the strategies, but they seem very elementary because he does not control for risk factors.
By that I mean that you can have a super complex strategy with lots of bells and w... |
What are the risk factors in analysing strategies? |
I am designing an asset allocation strategy/fund which invests in four asset classes (via four independent sub-funds):
1. Domestic equity
2. International equity
3. Domestic fixed income
4. Foreign currencies
The strategy must be fully invested in these four funds at all times. I already have a default "s... |
How do I price OANDA box options without using their slow and
machine-unfriendly user interface?:
- http://fxtrade.oanda.com (free demo account) sells "box options":
- If you already know what a box option is (or visit
http://fxtrade.oanda.com/trade-forex/fxtrade/box-options or signup
for ... |
How do I price OANDA box options? |
Are there any good tools for back testing options strategies? |
> **Possible Duplicate:**
> [Where to download list of all common stocks traded on NYSE, NASDAQ and AMEX?](http://quant.stackexchange.com/questions/1640/where-to-download-list-of-all-common-stocks-traded-on-nyse-nasdaq-and-amex)
<!-- End of automatically inserted text -->
Is it possible to download a list of stoc... |
Why not just use the weighted mid-market price, quoted as `(Bsize * Aprc + Asize * Bprc) / (Asize + Bsize)`? This measure doesn't suffer a bounce per se and allows you to directly take moving or exponential moving averages. |
I have a one year transition matrix for three consecutive years. Multiplying these three matrices together yields the three year transition matrix. I want to obtain the average transition matrix for the three years (average^3 = 3yrtransition)
What is the procedure to be used? Is this possible at all? (I kind of real... |
How do I get the average transition matrix for three consecutive years? |
One of the answers to [my previous question regarding the strategy of Renaissance Technologies][1], there was a reference to [The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It][2].
After doing some browsing in the book I found that it states that Renaissance Technologies obvio... |
How are cryptography and speech recognition technology applied to forecasting financial markets? |
There is [a large body of literature][1] on the "success" of the application of evolutionary algorithms in general, and the genetic algorithm in particular, to the financial markets.
However, I feel uncomfortable whenever reading this literature. Genetic algorithms can over-fit the existing data. With so many combi... |
How useful is the genetic algorithm for financial market forecasting? |
As far as I understand, most investors are willing to buy options (puts and calls) in order to limit their exposure to the market in case it moves against them. This is due to the fact that they are long gamma.
Being short gamma would mean that the exposure to the underlying becomes more long as the underlying price... |
What type of investor is willing to be short gamma? |
Rationale for choosing a particular windowing function when smothing a time series? |
What should be considered when selecting a windowing function when smoothing a time series? |
They say that the stock price process is a "martingale" and that is has "Markov property"
Are they unrelated? Is it that Markov property implies some sort of martingale property?
Or the other way around?
How do you statistically test for such properties? How far from reality is to assume such properties? |
From what I remember, there is no real relation between Markov and Martingale, and my intuition was confirmed by [this post][1].
Basically, it says that you can say neither of the following:
If A is Markov, then A is a martingale.
If A is a martingale, then A is Markov.
further down the post, you can find... |
Some people claim that the data-generating process for stocks is a "martingale" and that is has the "Markov property".
Are they unrelated? Is it that the Markov property implies some sort of martingale property, or is it the other way around?
How do you statistically test for such properties? How far from reality... |
Is the stock price process a martingale or a Markov process? |
Suppose one has an idea for a short-horizon trading strategy, which we will define as having an average holding period of under 1 week and a required latency between signal calculation and execution of under 1 minute. This category includes much more than just high-frequency market-making strategies. It also includes... |
How much data is needed to validate a short-horizon trading strategy? |
What does put-call parity imply about option premiums? |
How should I estimate the implied volatility skew term when calculating the skew-adjusted delta? |
I saw an article in which the writer had mentioned that he used chaos theory to predict stock prices and ended up with a profit over 30%. Chaos theory is basically about finding patterns called fractals in the data. It is used in various fields such as weather prediction and stock price determination.
How we can ... |
How we can forecast stock prices using chaos theory? |
To see the connection between **put-call parity and option price** you should read this highly insightful paper by Espen Gaarder Haug & Nassim Nicholas Taleb:
> [Option traders use (very) sophisticated heuristics, never the Black–
Scholes–Merton formula][1]
It shows how you can heuristically derive option pricin... |
The question is inspired by yesterday's (06/09/11) historic announcement by the Swiss National Bank that it would impose a ceiling on the franc of 1.20 against the euro.
I would like to know if there are any standard models to value currency options and quantos when the currency exchange rate is effectively capped b... |
How should FX options be priced when a currency is artificially capped? |
In their 1990 book, [A Non-Random Walk Down Wall Street][1], Andrew Lo and Craig MacKinlay document a number of persistent predictable patterns in stock prices. One of these "anomalies" is variously known as lead-lag or serial cross-correlation, and it says that the returns of larger, more liquid stocks tend to lead t... |
Why do some anomalies persist while others fade away? |
Very good question! I think part of the answer lies in the structure of the financial industry.
Some anomalies have a certain kind of structure which cannot be exploited by the players that are big enough to let the anomaly disappear. I would put e.g. the Turn-of-the-month effect (TOTM) into this category since big ... |
In their 1990 book, [A Non-Random Walk Down Wall Street][1], Andrew Lo and Craig MacKinlay document a number of persistent predictable patterns in stock prices. One of these "anomalies" is variously known as lead-lag or serial cross-correlation, and it says that the returns of larger, more liquid stocks tend to lead t... |
http://billing.finance.yahoo.com/realtime_quotes/signup?.src=quote&.refer=quote
Can i get real time data(from NSE india) using Yahoo finance API after subscribing to their service ?
|
I'm working on a tool to price Credit Default Swaps. I've already done the standard pricing tools. I'm working on a pricing tool which uses the credit rating for the default probabilities used in the pricing of CDS. What is the relation between these probabilities and the price? |
What is the connection between default probabilities calculated using the credit rating and the price of a CDS? |
There are a couple components to this problem:
1. Construct a portfolio incorporating relative views where weights shrink towards a default policy
1a. Some views are in currency-hedged terms
1b. Relative views are on a 5-point scale
2. Maximize a mean-variance utility function incorporating a penalty fo... |
I am looking for an all-java implementation of black scholes, preferably open source. I found jquantlib and quantlib (C++). Any other recommendations?
Also the site seems to be down for the last 30 mins.
http://www.jquantlib.org/
I'd prefer to stay away from a C++ implementation that runs on a jvm like quantli... |
I need to estimate **cumulative** earnings over the next Y years and I'd like to find a solution that is theoretically sound and relatively simple. Can anyone recommend an approach?
**Given:**
I have 30 years of historical monthly earnings. |
What is a sound way to project Company X's earnings over the next Y years? |
Estimating fundamental factor models: Treat factors as observable or un-observable? (Cross-sectional vs. Time-Series approach) |
I'm writing the Bachelor thesis but I need some informations...
I need to find some practical examples and applications of the Compound Poisson Process in insurance.
Could anyone help me, please?
cheers
F/T |
I'm writing the Bachelor thesis but I need some information. I need to find some practical examples and applications of the Compound Poisson Process in insurance. Does anyone have any good examples? |
What are some examples of Compound Poisson processes in insurance? |
Why would an investor trade a variance swap over a volatility swap? Is it simply related to the leverage involved in a Var (i.e. sigma-squared) or is there something else to it?
|
Why would an investor trade a variance swap over a volatility swap? |
Black Scholes in java?
This guy, Christian Fries [http://www.christian-fries.de/][1], has some impressive codes and a book on these topics.
You can find [http://www.christian-fries.de/finmath/book/index.html][2] the contents as well as the library itself [http://www.finmath.net/java/][3].
As well as your requ... |
If you want a simple generic approach, try to build a time-series model. A log-linear trend model or building an auto-regressive model such as ARMA (on a stationary) series would probably work. As a start point I would plot the data to see what features you notice (seasonality? exponential growth? one-off shocks?)
N... |
If you want a simple generic approach, try to build a time-series model. A log-linear trend model or building an auto-regressive model such as ARMA (on a stationary) series would probably work. As a start point I would plot the data to see what features you notice (seasonality? exponential growth? mean-reversion? trend... |
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