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Most important papers for quantitative traders

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Re: Most important papers for quantitative traders

#21

Post by NickC25 »

satellite2 wrote: post #8

I stopped at the table of content but the bibliography covers what any introductory finance 101 course would cover. I interpreted the title as suggesting there was a bit of novelty in there so it's a bit disappointing. Without the above papers you cannot invest while claiming doing anything else than playing at a casino. But it's clearly not sufficient to design a profitable quantitative strategy in 2023.

>Without the above papers you cannot invest while claiming doing anything else than playing at a casino.

I don't think that's a fair statement, although I agree with the overall sentiment. Maybe the right term instead of "invest" would be "actively trade". Putting a chunk of change into long-term positions (especially stock) on large profitable companies as well as indexes and dividend-generating equities with a view towards cashing out in 30-40 years (and semi-actively monitoring said portfolio) isn't really the same as playing at a casino. If I'm looking for a 10-30% return in a day or a week, yeah, that's playing at a casino. If I'm looking for 7-10% a year, that's just me protecting my money against inflation.

Re: Most important papers for quantitative traders

#22

Post by rgbgraph »

mydriasis wrote: post #18

This is what I wanted to do when I was getting my math degree! I wanted to be a quant. Things went a different direction and I'm a programmer now. Is there any hope for me? Think I could still chase it down in my spare time, or is it something I need, say, a master's degree for?

You will be better off going independent, than trying to break into the industry (unless your PhD was from a top program, and you're on the younger side).

In that vein, Ernest P. Chan's books will give you the toolkit to begin, and then you can figure out the rest as-needed. Quantitative Trading (2nd), Chan I believe is the first in the series. Algorithmic Trading I believe is the second. And Machine Trading is the last.

Re: Most important papers for quantitative traders

#23

Post by mydriasis »

rgbgraph wrote: post #22
mydriasis wrote: post #18

This is what I wanted to do when I was getting my math degree! I wanted to be a quant. Things went a different direction and I'm a programmer now. Is there any hope for me? Think I could still chase it down in my spare time, or is it something I need, say, a master's degree for?

You will be better off going independent, than trying to break into the industry (unless your PhD was from a top program, and you're on the younger side). In that vein, Ernest P. Chan's books will give you the toolkit to begin, and then you can figure out the rest as-needed. Quantitative Trading (2nd), Chan I believe is the first in the series. Algorithmic Trading I believe is the second. And Machine Trading is the l…

That's awesome, I appreciate it. Do I need a ton of money to start off? Is it better _not_ to have a lot of money to start off to create less trouble for myself?

Re: Most important papers for quantitative traders

#24

Post by oersted »

I found other impactful and more recent papers via MirrorThink.ai that discuss various aspects of quantitative finance, trading, optimal execution, energy prices, GARCH, option valuation, portfolio selection, Kelly Criterion, Capital Asset Pricing Model, optimal trading signals, Efficient Market Hypothesis, Black-Scholes model, and market overreaction. Here are some key findings from these papers:

1. Portfolio Optimization-Based Stock Prediction Using Long-Short Term Memory Network in Quantitative Trading (Published on 2020-01-07) - This paper discusses the use of Long-Short Term Memory (LSTM) networks in quantitative trading to minimize risk and maximize return based on historical performance. It highlights the benefits of quantitative trading, such as lower commissions, anonymity, control, discipline, transparency, access, competition, and reduced transaction costs.

2. A Markov-Switching VSTOXX Trading Algorithm for Enhancing EUR Stock Portfolio Performance (Published on 2021-05-02) - This paper presents a Markov-switching trading algorithm that uses the VSTOXX index to enhance the performance of a EUR stock portfolio. The algorithm is based on the mean-variance portfolio selection, which aims to maximize the Sharpe ratio.

3. Price discovery in the cryptocurrency option market: A univariate GARCH approach (Published on 2020-08-31) - This paper applies two different GARCH processes to Bitcoin and CRIX, showing that the GARCH(1,1) option pricing model provides realistic price discovery within the bid-ask prices suggested by the market.

4. The Capital Asset Pricing Model (Published on 2021-09-03) - This paper discusses the evolution of the Capital Asset Pricing Model (CAPM) and its connection to behavioral accounts of evolutionary asset pricing, segmented markets, multifractality, and the fractal market hypothesis. It highlights the importance of considering heterogeneity among investors and the implications for the efficient market hypothesis.

[1] https://doi.org/10.3390/app10020437

[2] https://doi.org/10.3390/math9091030

[3] https://doi.org/10.1080/23322039.2020.1803524

[4] https://doi.org/10.3390/encyclopedia1030070

Re: Most important papers for quantitative traders

#25

Post by JackFr »

lockdown22 wrote: post #16

Nice article, I'll definitely read some of the outlined books. Thanks for sharing. My personal experience is that you don't need to fully understand the Black Scholes Pricing model in order to trade profitable options. As an example consider the public income trades, such as NetZero, Boxcar, M3, Theta Engine. Trading those doesn't require you to understand how Implied Volatility. One can argue, however, that selling…

The Black Scholes paper is actually pretty difficult, and not terribly rewarding with respect to developing intuition. To develop the intuition, get a full handle on put-call parity, the construction of replicating portfolios, and then risk-neutral pricing. Additionally, always have an eye on the intrinsic value, time value and insurance value of options and how they move with respect to the options characteristics.

Re: Most important papers for quantitative traders

#26

Post by martinmayer »

mydriasis wrote: post #18

This is what I wanted to do when I was getting my math degree! I wanted to be a quant. Things went a different direction and I'm a programmer now. Is there any hope for me? Think I could still chase it down in my spare time, or is it something I need, say, a master's degree for?

Hi there! I'm the author of the article.If you have a programming skills and a mathematics background, it is possible to break into the industry. Even better if your current role is as a data scientist of machine learning engineer.

I work as a quant on a second tier hedge fund. The pool of potential firms is actually pretty big, but most people think that the only shops out there are citadel, two sigma or rentech. That is definitely not the case, and the salaries are still excellent (comparable to FAANG).

Re: Most important papers for quantitative traders

#28

Post by nsriv »

conformist wrote: post #9

Probably better to learn the basics and get a good overview, eg by reading Grinold & Kahn instead: https://books.google.com/books/about/Active_Portfolio_Manage...

Went looking for this on your recommendation and found that there is an updated version/follow-on text, linking here for anyone else that may find it useful:

https://www.google.com/books/edition/Advances_in_Active_Port...

Re: Most important papers for quantitative traders

#29

Post by chasd00 »

mydriasis wrote: post #23
rgbgraph wrote: post #22

Earlier quoted context omitted.

You will be better off going independent, than trying to break into the industry (unless your PhD was from a top program, and you're on the younger side). In that vein, Ernest P. Chan's books will give you the toolkit to begin, and then you can figure out the rest as-needed. Quantitative Trading (2nd), Chan I believe is the first in the series. Algorithmic Trading I believe is the second. And Machine Trading is the l…

That's awesome, I appreciate it. Do I need a ton of money to start off? Is it better _not_ to have a lot of money to start off to create less trouble for myself?

> Do I need a ton of money to start off?

well the best way to make a small fortune is to start with a large fortune ;)

Re: Most important papers for quantitative traders

#30

Post by a_c »

tmsh wrote: post #27

Stephen Ross ( https://en.wikipedia.org/wiki/Stephen_Ross_(economist) )'s books on APT / CAPM are pretty good too imho.

Can you share the books that you are referring to? A quick search on https://www.goodreads.com/author/show/169424.Stephen_A_Ross didn't seem to turn up relevant results
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