Pairs Trading

Quantitative Methods and Analysis

Author: Ganapathy Vidyamurthy

Publisher: John Wiley & Sons

ISBN: 9781118045701

Category: Business & Economics

Page: 224

View: 7100

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The first in-depth analysis of pairs trading Pairs trading is a market-neutral strategy in its most simple form. The strategy involves being long (or bullish) one asset and short (or bearish) another. If properly performed, the investor will gain if the market rises or falls. Pairs Trading reveals the secrets of this rigorous quantitative analysis program to provide individuals and investment houses with the tools they need to successfully implement and profit from this proven trading methodology. Pairs Trading contains specific and tested formulas for identifying and investing in pairs, and answers important questions such as what ratio should be used to construct the pairs properly. Ganapathy Vidyamurthy (Stamford, CT) is currently a quantitative software analyst and developer at a major New York City hedge fund.
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Market Risk Analysis, Quantitative Methods in Finance

Author: Carol Alexander

Publisher: John Wiley & Sons

ISBN: 047077102X

Category: Business & Economics

Page: 318

View: 9139

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Written by leading market risk academic, Professor Carol Alexander, Quantitative Methods in Finance forms part one of the Market Risk Analysis four volume set. Starting from the basics, this book helps readers to take the first step towards becoming a properly qualified financial risk manager and asset manager, roles that are currently in huge demand. Accessible to intelligent readers with a moderate understanding of mathematics at high school level or to anyone with a university degree in mathematics, physics or engineering, no prior knowledge of finance is necessary. Instead the emphasis is on understanding ideas rather than on mathematical rigour, meaning that this book offers a fast-track introduction to financial analysis for readers with some quantitative background, highlighting those areas of mathematics that are particularly relevant to solving problems in financial risk management and asset management. Unique to this book is a focus on both continuous and discrete time finance so that Quantitative Methods in Finance is not only about the application of mathematics to finance; it also explains, in very pedagogical terms, how the continuous time and discrete time finance disciplines meet, providing a comprehensive, highly accessible guide which will provide readers with the tools to start applying their knowledge immediately. All together, the Market Risk Analysis four volume set illustrates virtually every concept or formula with a practical, numerical example or a longer, empirical case study. Across all four volumes there are approximately 300 numerical and empirical examples, 400 graphs and figures and 30 case studies many of which are contained in interactive Excel spreadsheets available from the accompanying CD-ROM . Empirical examples and case studies specific to this volume include: Principal component analysis of European equity indices; Calibration of Student t distribution by maximum likelihood; Orthogonal regression and estimation of equity factor models; Simulations of geometric Brownian motion, and of correlated Student t variables; Pricing European and American options with binomial trees, and European options with the Black-Scholes-Merton formula; Cubic spline fitting of yields curves and implied volatilities; Solution of Markowitz problem with no short sales and other constraints; Calculation of risk adjusted performance metrics including generalised Sharpe ratio, omega and kappa indices.
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Optimal Mean Reversion Trading

Mathematical Analysis and Practical Applications

Author: Tim Leung,Xin Li

Publisher: World Scientific

ISBN: 9814725935

Category: Business & Economics

Page: 220

View: 8519

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' Optimal Mean Reversion Trading: Mathematical Analysis and Practical Applications provides a systematic study to the practical problem of optimal trading in the presence of mean-reverting price dynamics. It is self-contained and organized in its presentation, and provides rigorous mathematical analysis as well as computational methods for trading ETFs, options, futures on commodities or volatility indices, and credit risk derivatives. This book offers a unique financial engineering approach that combines novel analytical methodologies and applications to a wide array of real-world examples. It extracts the mathematical problems from various trading approaches and scenarios, but also addresses the practical aspects of trading problems, such as model estimation, risk premium, risk constraints, and transaction costs. The explanations in the book are detailed enough to capture the interest of the curious student or researcher, and complete enough to give the necessary background material for further exploration into the subject and related literature. This book will be a useful tool for anyone interested in financial engineering, particularly algorithmic trading and commodity trading, and would like to understand the mathematically optimal strategies in different market environments. Contents:IntroductionTrading Under Ornstein–Uhlenbeck ModelTrading Under the Exponential OU ModelTrading Under CIR ModelFutures Under Mean ReversionOptions Liquidation of OptionsTrading Credit Derivatives Readership: Doctoral and master''s students, advanced undergraduates, practitioners, and researchers in financial engineering, with a particular interest or specialization in algorithmic trading (especially pairs trading) and ETFs, futures, commodities, volatility derivatives and credit risk. Key Features:Contains both an analysis of trading strategies and methods and means of practical implementationApproaches the topic using a balanced approach of rigorous analysis and real-world examples taken from a variety of market sectors such as fixed income funds, commodities, index/volatility futures, and optionsIncludes detailed analysis of ETF-based pairs trading strategies, and other mean reversion strategiesExplains issues involved in the day-to-day life of traders, going beyond the mathematics of tradingProvides mathematical justification and quantitative enhancement for certain intuitive trading strategies that can be used by practitionersKeywords:Trading Strategies;Mean Reversion;Optimal Stopping;Optimal Switching;Stop-Loss;Stochastic Processes;Exchange-Traded Funds (ETFS);Ornstein–Uhlenbeck Model;Cox-Ingersoll-Ross (CIR) Model'
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Advanced Mathematical Methods for Finance

Author: Julia Di Nunno,Bernt Øksendal

Publisher: Springer Science & Business Media

ISBN: 9783642184123

Category: Mathematics

Page: 536

View: 8429

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This book presents innovations in the mathematical foundations of financial analysis and numerical methods for finance and applications to the modeling of risk. The topics selected include measures of risk, credit contagion, insider trading, information in finance, stochastic control and its applications to portfolio choices and liquidation, models of liquidity, pricing, and hedging. The models presented are based on the use of Brownian motion, Lévy processes and jump diffusions. Moreover, fractional Brownian motion and ambit processes are also introduced at various levels. The chosen blend of topics gives an overview of the frontiers of mathematics for finance. New results, new methods and new models are all introduced in different forms according to the subject. Additionally, the existing literature on the topic is reviewed. The diversity of the topics makes the book suitable for graduate students, researchers and practitioners in the areas of financial modeling and quantitative finance. The chapters will also be of interest to experts in the financial market interested in new methods and products. This volume presents the results of the European ESF research networking program Advanced Mathematical Methods for Finance.
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Handbook of Hedge Funds

Author: François-Serge Lhabitant

Publisher: John Wiley & Sons

ISBN: 9781119995241

Category: Business & Economics

Page: 654

View: 8777

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A comprehensive guide to the burgeoning hedge fund industry Intended as a comprehensive reference for investors and fund and portfolio managers, Handbook of Hedge Funds combines new material with updated information from Francois-Serge L’habitant’s two other successful hedge fund books. This book features up-to-date regulatory and historical information, new case studies and trade examples, detailed analyses of investment strategies, discussions of hedge fund indices and databases, and tips on portfolio construction. Francois-Serge L’habitant (Geneva, Switzerland) is the Head of Investment Research at Kedge Capital. He is Professor of Finance at the University of Lausanne and at EDHEC Business School, as well as the author of five books, including Hedge Funds: Quantitative Insights (0-470-85667-X) and Hedge Funds: Myths & Limits (0-470-84477-9), both from Wiley.
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Statistical Arbitrage

Algorithmic Trading Insights and Techniques

Author: Andrew Pole

Publisher: John Wiley & Sons

ISBN: 1118160738

Category: Business & Economics

Page: 230

View: 739

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While statistical arbitrage has faced some tough times?as markets experienced dramatic changes in dynamics beginning in 2000?new developments in algorithmic trading have allowed it to rise from the ashes of that fire. Based on the results of author Andrew Pole?s own research and experience running a statistical arbitrage hedge fund for eight years?in partnership with a group whose own history stretches back to the dawn of what was first called pairs trading?this unique guide provides detailed insights into the nuances of a proven investment strategy. Filled with in-depth insights and expert advice, Statistical Arbitrage contains comprehensive analysis that will appeal to both investors looking for an overview of this discipline, as well as quants looking for critical insights into modeling, risk management, and implementation of the strategy.
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Business Data Science: Combining Machine Learning and Economics to Optimize, Automate, and Accelerate Business Decisions

Author: Matt Taddy

Publisher: McGraw Hill Professional

ISBN: 1260452786

Category: Business & Economics

Page: 384

View: 9940

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Publisher's Note: Products purchased from Third Party sellers are not guaranteed by the publisher for quality, authenticity, or access to any online entitlements included with the product. Use machine learning to understand your customers, frame decisions, and drive value The business analytics world has changed, and Data Scientists are taking over. Business Data Science takes you through the steps of using machine learning to implement best-in-class business data science. Whether you are a business leader with a desire to go deep on data, or an engineer who wants to learn how to apply Machine Learning to business problems, you’ll find the information, insight, and tools you need to flourish in today’s data-driven economy. You’ll learn how to: •Use the key building blocks of Machine Learning: sparse regularization, out-of-sample validation, and latent factor and topic modeling•Understand how use ML tools in real world business problems, where causation matters more that correlation•Solve data science programs by scripting in the R programming language Today’s business landscape is driven by data and constantly shifting. Companies live and die on their ability to make and implement the right decisions quickly and effectively. Business Data Science is about doing data science right. It’s about the exciting things being done around Big Data to run a flourishing business. It’s about the precepts, principals, and best practices that you need know for best-in-class business data science.
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Financial Markets and Trading

An Introduction to Market Microstructure and Trading Strategies

Author: Anatoly B. Schmidt

Publisher: John Wiley & Sons

ISBN: 0470924128

Category: Business & Economics

Page: 194

View: 9296

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Financial Markets and Trading Over the last decade, the financial landscape has undergone a significant transformation—shaped by the forces of technology, globalization, and market innovations to name a few. In order to operate effectively in today's markets, you need more than just the motivation to succeed, you need a firm understanding of how modern financial markets work and what professional trading is really about. Nobody understands this better than author Anatoly Schmidt, and in his new book, he puts these topics in perspective by providing you with an informative overview of modern financial markets, and the theoretical concepts of market microstructure, as well as an engaging assessment of the methods used in deriving and back-testing trading strategies. Divided into three comprehensive parts, this reliable resource offers a balance between the theoretical aspects of market microstructure and trading strategies that may be more relevant for practitioners. Part One details the modern financial markets for equities, foreign exchange, and fixed income—starting with an introduction to various types of traders, orders, and market structures and then presenting the major market microstructure models. Some important empirical properties of modern equity and foreign exchange markets are also described. Part Two addresses the basics of market dynamics, including statistical distributions, dynamics, and volatility of returns—discussing the efficient market hypothesis and possible predictability of returns as well as introducing the concepts of agent-based modeling of financial markets. Part Three is devoted entirely to trading, and offers a summary of approaches used in technical analysis and statistical arbitrage as well as a more detailed description of trading performance criteria and back-testing strategies. Ideas used in optimal order execution, such as optimal order slicing and the taker's dilemma, are also examined. Two appendices are also included to support the main material in this book. Appendix A provides reference material on basic statistical notions and statistical distributions that are frequently used in finance. And Appendix B describes the main concepts of time series analysis: autoregressive and moving average models, trends and seasonality, and multivariate models. If you're unprepared to enter today's markets you will underperform. But with Financial Markets and Trading as your guide, you'll quickly discover what it takes to make it in this competitive field.
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