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The Birth of a Quant Trader

  • #81
  • Mar 23, 2011 11:31am Mar 23, 2011 11:31am
Quoting mikkom
That is one of the most incorrect comments of this thread. Of course there are academic papers with value out there.
Of course, I have written some myself But for a beginner to learn trading, there's little of value.

Unless you are going the quant route, but the question wasn't stated in that context as I understood it.

But even then it's mostly about rule testing rather than trading system development.

Quote
ps. Medici you didn't answer to question to what is the exact definition of volatility, I'm quite intrigued to learn your answer to that as afaik there is no such thing (is it maybe sq of var which is flawed? IV maybe? Both are correct answers btw)?

I simply meant the standard definition that you can find in Wikipedia. You may think it's flawed, but that's what people use.
  • #82
  • Mar 23, 2011 4:56pm Mar 23, 2011 4:56pm
Quoting mikkom
That is one of the most incorrect comments of this thread. Of course there are academic papers with value out there.

This thread has turned into quant vs non-quant approach war and I think it's totally unnecessary.

Oh well, I go back to my cave

ps. Medici you didn't answer to question to what is the exact definition of volatility, I'm quite intrigued to learn your answer to that as afaik there is no such thing (is it maybe sq of var which is flawed? IV maybe? Both are correct answers btw)?
Volatility imho just means fast price action, pre fo lo is slow and predictable, so is post lo and pre usa open, easy to plot direction, fo lo is volatile, tough to make a profit, why complicate it.

With practice slow sessions and volatile sessions can be traded profitably, keep it simple.
  • #83
  • Mar 24, 2011 1:31am Mar 24, 2011 1:31am
Quoting medici
I simply meant the standard definition that you can find in Wikipedia. You may think it's flawed, but that's what people use.
You still didn't answer the question. The wikipedia page contains at least 5 different cases of volatility.

LTCM fiasco kind of proved that "traditional" volatility formulas are not exactly correct as they are based on flawed assumptations (they don't use volatility clustering or correlations as part of the formula for example)
  • #84
  • Edited 1:49am Mar 24, 2011 1:31am | Edited 1:49am
Quoting jag1966
why complicate it.
For example because there are volatility trading strategies where people estimate volatility better than IV and make money with it?

This "quant" stuff is not all about directional simple strategies.
  • #85
  • Mar 24, 2011 1:34am Mar 24, 2011 1:34am
Quoting mikkom
For example because there are volatility trading strategies where people estimate volatility better than IV and make money with it?
Thanks, my comment was directed at those trying to learn to trade not those trying to learn quants, my bad, sorry.
  • #86
  • Mar 24, 2011 2:51am Mar 24, 2011 2:51am
Quoting mikkom
You still didn't answer the question. The wikipedia page contains at least 5 different cases of volatility.

LTCM fiasco kind of proved that "traditional" volatility formulas are not exactly correct as they are based on flawed assumptations (they don't use volatility clustering or correlations as part of the formula for example)
I am sure you know which definition I mean, i.e. the standard one, and I am aware of models for stochastic volatility modelling too. And so are you, which you seem keen to point out.
  • #87
  • Mar 24, 2011 3:07am Mar 24, 2011 3:07am
Quoting medici
I am sure you know which definition I mean, i.e. the standard one, and I am aware of models for stochastic volatility modelling too. And so are you, which you seem keen to point out.
That is not what I'm trying to say at all. What I'm trying to say is that it would be much more useful to be clear on comments on what you are exactly talking about than post comments that rely on authority rather than facts.
  • #88
  • Mar 24, 2011 3:12am Mar 24, 2011 3:12am
Quoting mikkom
That is not what I'm trying to say at all. What I'm trying to say is that it would be much more useful to be clear on comments on what you are exactly talking about than post comments that rely on authority rather than facts.
Authority? I'm afraid you've lost me there. I was simply pointing out that somebody else wasn't clear about what they said when talking about volatility or how to measure it.

Somebody started this thread announcing his plans for trading, and some of us have engaged in conversation with him around that. What value do you bring by playing silly school-master?
  • #89
  • Mar 24, 2011 3:28am Mar 24, 2011 3:28am
Mikkom, you seem to know about vols, so here's something that I'm curious about. Given vol clustering is not part of Garman-Kohlhagen pricing, do banks work their own option pricing model, or is it still the standard? And if it's still the standard, why? Given they've got a few brains kicking around in the financial world, it would seem to be a blind spot or a good reason for it?
  • #90
  • Mar 24, 2011 4:10am Mar 24, 2011 4:10am
Quoting triphop
Mikkom, you seem to know about vols, so here's something that I'm curious about. Given vol clustering is not part of Garman-Kohlhagen pricing, do banks work their own option pricing model, or is it still the standard? And if it's still the standard, why? Given they've got a few brains kicking around in the financial world, it would seem to be a blind spot or a good reason for it?
To be honest, I have no idea how banks do it.
  • #91
  • Mar 24, 2011 5:31am Mar 24, 2011 5:31am
Quoting mikkom
For example because there are volatility trading strategies where people estimate volatility better than IV and make money with it?

This "quant" stuff is not all about directional simple strategies.
Are you referring to market neutral/arbitrage strats or alike?
  • #92
  • Mar 24, 2011 5:33am Mar 24, 2011 5:33am
Quoting medici
Of course, I have written some myself But for a beginner to learn trading, there's little of value.

Unless you are going the quant route, but the question wasn't stated in that context as I understood it.

But even then it's mostly about rule testing rather than trading system development.

I simply meant the standard definition that you can find in Wikipedia. You may think it's flawed, but that's what people use.
Thats interesting. May I ask on what subjects are they based on, if these docs are of value to me and if so can you point them out to me?

cheers
  • #93
  • Mar 24, 2011 5:35am Mar 24, 2011 5:35am
Quoting medici
Authority? I'm afraid you've lost me there. I was simply pointing out that somebody else wasn't clear about what they said when talking about volatility or how to measure it.

Somebody started this thread announcing his plans for trading, and some of us have engaged in conversation with him around that. What value do you bring by playing silly school-master?
May I humbly suggest when pointing out definitions on subjects that you link to them so as to better understand your view on the matter?

Cheers
  • #94
  • Mar 24, 2011 5:37am Mar 24, 2011 5:37am
Quoting triphop
Mikkom, you seem to know about vols, so here's something that I'm curious about. Given vol clustering is not part of Garman-Kohlhagen pricing, do banks work their own option pricing model, or is it still the standard? And if it's still the standard, why? Given they've got a few brains kicking around in the financial world, it would seem to be a blind spot or a good reason for it?
Maybe they have their own proprietary approaches?
  • #95
  • Mar 24, 2011 6:42am Mar 24, 2011 6:42am
If you are interested in programming your own system then it is worth checking out this site.

http://www.asirikuy.com/

I have no affiliation to this website but it has some good info on the practical aspects of designing a system and automating it.
  • #96
  • Mar 24, 2011 6:52am Mar 24, 2011 6:52am
The link you have provided is about ''system selling'' nothing to do with ''quantitive modellings''.
  • #97
  • Mar 24, 2011 7:11am Mar 24, 2011 7:11am
Hi,

If you mean the website is trying to selling you a system then I think you need to read the details on the website a bit closer. If that is not what you meant then I do not understand your post.

Whilst it has nothing to do with quant trading per se, it has a lot of information on it about building and testing systems especially automated systems.

Whilst it is a membership site there is plenty of free information, which I have personally used to help improve my own back testing.

I posted the link because I thought the OP might find some of the information helpful.

If it is not of any use then my apologies.

Regards

A
  • #98
  • Edited 9:41am Mar 24, 2011 9:31am | Edited 9:41am
Quoting Pipalicious
Thats interesting. May I ask on what subjects are they based on, if these docs are of value to me and if so can you point them out to me?

cheers
Haha, no, no personally identifiable information. And you're not missing anything relevant, in spite of the brillant quality of the analysis

EDIT: If you still are serious about quant trading, what you need is a good general quant education (not necessarily rocket science level) rather than isolated specifics. That way you would be able to work independently in developing your models.
  • #99
  • Mar 24, 2011 9:34am Mar 24, 2011 9:34am
Quoting Pipalicious
May I humbly suggest when pointing out definitions on subjects that you link to them so as to better understand your view on the matter?

Cheers
Of course, and I think I give ample references where need be. And in this case my intention was never to discuss volatility models, but simply to question your statement that the only thing that changes in the markets is the volatility.
  • #100
  • Mar 24, 2011 11:27am Mar 24, 2011 11:27am
Quoting medici

EDIT: If you still are serious about quant trading, what you need is a good general quant education (not necessarily rocket science level) rather than isolated specifics. That way you would be able to work independently in developing your models.
To that end you may want to check out the book Trading Systems That Work by Thomas Stridsman. It would give you a framework to start building around.
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