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Most important papers for quantitative traders

qmr.ai

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Re: Most important papers for quantitative traders

#51

Post by matheusmoreira »

boppo1 wrote: post #40
dia80 wrote: post #35

Quant trader here... I'm a big seller of this list. Making money tends to be a relatively empirical endeavor. It's all about having information about the future and using that in judiciously way and less so about any particular theory or model. I see someone else mentioning Grinold and Khan "Active Portfolio Management", I can't recommend it enough, it's basically a how to for making money quantitatively in a princip…

> having information about the future How, uh, do you do this legally? >If you are using python And if you're using C++?

> How, uh, do you do this legally?

Why would it be illegal if you're not directly involved with the corporation? Surely insider trading implies actually being some kind of insider. Like some politician selling stock before some regulation takes effect.

Re: Most important papers for quantitative traders

#52

Post by nl »

boppo1 wrote: post #40
dia80 wrote: post #35

Quant trader here... I'm a big seller of this list. Making money tends to be a relatively empirical endeavor. It's all about having information about the future and using that in judiciously way and less so about any particular theory or model. I see someone else mentioning Grinold and Khan "Active Portfolio Management", I can't recommend it enough, it's basically a how to for making money quantitatively in a princip…

> having information about the future How, uh, do you do this legally? >If you are using python And if you're using C++?

> How, uh, do you do this legally?

It's simple to have information about the future in entirely legal ways. Usually the future information is available, just unequally distributed.

The best example of this is the movie "The Big Short" where it the information about the upcoming crash of subprime-backed bonds just required people to bother reading large amounts of bond composition documents. Only 3 groups really did this.

Another good examples is how some funds pay for logistics intelligence (via satellite reconnaissance, customs declarations etc) to forecast sales figures.

Re: Most important papers for quantitative traders

#53

Post by qnt »

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?

The fail rate for traders in a real trading firm is something like 50% anecdotally (i.e. 1/2 of those hired don't make past 12mo mark)

The fail rate for retail traders without the professional environment backing them would be >95%.

That is to say the best thing you could do to increase the probability of your success is to get in the door at a reputable place.

https://robotwealth.com/ is probably the only source of information for a retail trader that I'd recommend. It's still far inferior to actually getting a seat at a real shop.

There's plenty of work for programmers in trading companies too - much better job stability than for traders.

Re: Most important papers for quantitative traders

#54

Post by htag »

boppo1 wrote: post #38

Kinda tangential, but hopefully someone lurking in here will bite: With the growing popularity of passive strategy among institutional and retail investors, will EMH break down and create opportunities for active strategy again? As I understand it, active strategy is a borderline fools' errand on the timeline of ten or more years. But if everyone just buys the S&P, surely that means fewer eyeballs on price discovery…

There has always been room for active strategies, and there will continue to be room for active strategies. It's very likely _your_ active strategy isn't as good as buying and holding an index fund.

Re: Most important papers for quantitative traders

#55

Post by pjacotg »

JackFr wrote: post #25
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.

I found learning about the binomial model to be particularly good at establishing intuition about option pricing. Nowadays it's considered a toy model but it makes the ideas of a replicating portfolio and risk neutral probabilities very clear with nothing more than basic high school math.

Re: Most important papers for quantitative traders

#56

Post by roflyear »

boppo1 wrote: post #40
dia80 wrote: post #35

Quant trader here... I'm a big seller of this list. Making money tends to be a relatively empirical endeavor. It's all about having information about the future and using that in judiciously way and less so about any particular theory or model. I see someone else mentioning Grinold and Khan "Active Portfolio Management", I can't recommend it enough, it's basically a how to for making money quantitatively in a princip…

> having information about the future How, uh, do you do this legally? >If you are using python And if you're using C++?

You know rates will go down eventually. You know the debt ceiling deal will probably pass and the market will like it. Plenty of things we can know.

Re: Most important papers for quantitative traders

#57

Post by roflyear »

matheusmoreira wrote: post #51
boppo1 wrote: post #40

Earlier quoted context omitted.

> having information about the future How, uh, do you do this legally? >If you are using python And if you're using C++?

> How, uh, do you do this legally? Why would it be illegal if you're not directly involved with the corporation? Surely insider trading implies actually being some kind of insider. Like some politician selling stock before some regulation takes effect.

Trading on insider knowledge is illegal afaik

Re: Most important papers for quantitative traders

#58

Post by tmsh »

a_c wrote: post #30
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

Papers are pretty good https://en.m.wikipedia.org/wiki/Arbitrage_pricing_theory

The CAPM model and APT imho is what portfolio management theory is based on: valuing equities or other instruments relative to each other. Useful for pairs trading, alpha, beta, and really all risk management. His portfolio theory textbooks are good too I think.

Most serious trading strategies can be summarized by highlighting a sentence in Hull’s book. That’s how it was in the 00s anyway. It’s all just innovation was execution and not just speed. It relationships and little bits of edge on top of existing old strategies.

Stephen Ross actually seemed to provide the first real theory for risk management though. I wouldn’t be surprised if most prop trading firms are still based on that.

Re: Most important papers for quantitative traders

#59

Post by anon-3988 »

I am not a quant but I am working for one. Am I wrong to think that the quant analysts or "scientists" are not actually figuring out something fundamental about the market? You win by being "more complex" than your competition, which in turn makes the whole market more complex and this goes on endlessly.

Re: Most important papers for quantitative traders

#60

Post by matheusmoreira »

roflyear wrote: post #57
matheusmoreira wrote: post #51

Earlier quoted context omitted.

> How, uh, do you do this legally? Why would it be illegal if you're not directly involved with the corporation? Surely insider trading implies actually being some kind of insider. Like some politician selling stock before some regulation takes effect.

Trading on insider knowledge is illegal afaik

Seems vague to me.

So you go to an event or something. Company guy says something stupid that convinces you they're doomed to fail and then you make money by shorting their company's stock. That's illegal?

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