Apr
30
This is a review of the book “Quantitative Trading: How to Build Your Own Algorithmic Trading Business”, which is published by Wiley Trading, and written by Dr. Ernest Chan. Dr. Chan is and has been an independent trader, investor, and consultant for many years.
This book covers subjects that would be considered basic to intermediate by most people in this industry. The book itself is more of an instruction manual of how to get started and become profitable in this field. While it does discuss some mathematical formulas, they are not too difficult to follow or implement.
The book goes over many of Dr. Chan’s past experiences as a trader, and lets you know what he has learned from them. He will tell what to do, as well as what not to do, based on his successes and failures.
The book itself does not provide a strict guideline for you to follow with your investments. So if you are looking for an approach that says do (A, B, C, and D) and you will start making money, this is not the book for you. It provides you more of a philosophical approach to investing, that you must think about deeply, to fully appreciate.
It does however discuss different investing strategies that you can investigate further on your own that are centered on Dr. Chan’s expertise, which is, long and short equity strategies. You will learn how to research and accumulate the proper data, how to select the appropriate approach to investing that matches your personality and goals, as well as back-testing, and choosing a good trading platform.
This book covers subjects that would be considered basic to intermediate by most people in this industry. The book itself is more of an instruction manual of how to get started and become profitable in this field. While it does discuss some mathematical formulas, they are not too difficult to follow or implement. The book goes over many of Dr. Chan’s past experiences as a trader, and lets you know what he has learned from them. He will tell what to do, as well as what not to do, based on his successes and failures.
The book itself does not provide a strict guideline for you to follow with your investments. So if you are looking for an approach that says do (A, B, C, and D) and you will start making money, this is not the book for you. It provides you more of a philosophical approach to investing, that you must think about deeply, to fully appreciate.
It does however discuss different investing strategies that you can investigate further on your own that are centered on Dr. Chan’s expertise, which is, long and short equity strategies. You will learn how to research and accumulate the proper data, how to select the appropriate approach to investing that matches your personality and goals, as well as back-testing, and choosing a good trading platform.
Apr
29
Recently released US data is showing what several nationally recognized economist expected, which is a slowdown in the economy. Many companies stated that commodities prices; and especially oil, were eating away at their earnings.
Because of this, Wall Street moved lower last week, although NASDAQ stayed close to its 10 year high. Other information that came in suggesting this trend will continue is an unexpected rise in unemployment benefits to their highest levels since January.
One influential market analysis believes that as more data becomes available about the economy over the next few weeks, it will provide the figures required to determine if this will be a trend, or just a temporary slowdown for Wall Street.
Food prices have also increased sharply lately, which is leading to anxiety over inflation also following suit. Growth in the US economy has now slowed to 1.8%, as compared to the 2% which was forecasted.
Because of this, Wall Street moved lower last week, although NASDAQ stayed close to its 10 year high. Other information that came in suggesting this trend will continue is an unexpected rise in unemployment benefits to their highest levels since January.
One influential market analysis believes that as more data becomes available about the economy over the next few weeks, it will provide the figures required to determine if this will be a trend, or just a temporary slowdown for Wall Street.
Food prices have also increased sharply lately, which is leading to anxiety over inflation also following suit. Growth in the US economy has now slowed to 1.8%, as compared to the 2% which was forecasted.
Apr
15
Some of you may hear that the new release of R 2.13.0 is out, with some Windows-specific changes to R 2.13.0:
file.exists() and unlink() have more support for files > 2GB;
A few more file operations will now work with >2GB files.
which could help us to relieve the worry of handling large datasets in R. An exciting post shows us how to speed up R code up to 4 times by using the new R compiler package.
Download R 2.13.0 for Windows at http://cran.r-project.org/bin/windows/base/, to help you upgrade or install R for windows, here are a few useful articles:
http://cran.r-project.org/bin/windows/base/rw-FAQ.html#Does-R-run-under-Windows-Vista_003f
http://www.r-statistics.com/2011/04/how-to-upgrade-r-on-windows-7/
http://stackoverflow.com/questions/1401904/painless-way-to-install-a-new-version-of-r
file.exists() and unlink() have more support for files > 2GB;
A few more file operations will now work with >2GB files.
which could help us to relieve the worry of handling large datasets in R. An exciting post shows us how to speed up R code up to 4 times by using the new R compiler package.
Download R 2.13.0 for Windows at http://cran.r-project.org/bin/windows/base/, to help you upgrade or install R for windows, here are a few useful articles:
http://cran.r-project.org/bin/windows/base/rw-FAQ.html#Does-R-run-under-Windows-Vista_003f
http://www.r-statistics.com/2011/04/how-to-upgrade-r-on-windows-7/
http://stackoverflow.com/questions/1401904/painless-way-to-install-a-new-version-of-r
Apr
6
Black Scholes model assumes stock price follows GBM with constant volatility, however, the market implied volatilities of stock options often show "the volatility smile", which decreases with the strike level, and increases with the time to maturity. There are various proposed extensions of this GBM model to account for "the volatility smile". One approach is the implied binomial tree technique proposed by Rubinstein (1994), in which the author assumes the stock prices are generated by a modified random walk where the underlying assets volatility depends on both stock price and time, therefore it is an modification of basic Binomial tree method.
Implied binomial tree uses the observable market option prices in order to estimate the implied distribution, to construct such a tree, optimization routine generally applies and technically it is more difficult than a basic Binomial tree. Here is a good paper implementing the implied binomial tree using an Excel spreadsheet without VBA. It demonstrates both the optimization needed to generate implied ending risk-neutral probabilities from a set of actual option prices and the backwards recursion needed to solve for the entire implied tree.
Download the paper and accompanying excel file at http://www.kelleyschool.com/papers.html.
Implied binomial tree uses the observable market option prices in order to estimate the implied distribution, to construct such a tree, optimization routine generally applies and technically it is more difficult than a basic Binomial tree. Here is a good paper implementing the implied binomial tree using an Excel spreadsheet without VBA. It demonstrates both the optimization needed to generate implied ending risk-neutral probabilities from a set of actual option prices and the backwards recursion needed to solve for the entire implied tree.
Download the paper and accompanying excel file at http://www.kelleyschool.com/papers.html.
Apr
5
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