[HN Gopher] Most important papers for quantitative traders
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Most important papers for quantitative traders
Author : Anon84
Score : 120 points
Date : 2023-06-01 17:39 UTC (5 hours ago)
(HTM) web link (www.qmr.ai)
(TXT) w3m dump (www.qmr.ai)
| dia80 wrote:
| 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 principled way, there are
| lots of "tips and tricks" that go on top of this and it really
| helps to have some good intuition for the space you are trying to
| operate in (by that I mean understanding the eigenvalues and
| eigenvectors of your risk matrix). T-costs are also extremely
| important and the main "enemy" it's trivial to make money if you
| don't have to pay to trade.
|
| Steven Boyd at Stanford and his students / colleagues are
| probably the richest seam of up to date portfolio optimization
| wisdom. If you are using python you shoult probably be using
| CVXPY to build your portfolio. He has lots of good papers, e.g.
| see [2].
|
| Of course you also need an "edge", that information about the
| future, and that's the jealously guarded part...
|
| [1]
| https://books.google.co.uk/books/about/Active_Portfolio_Mana...
|
| [2] https://stanford.edu/~boyd/papers/pdf/cvx_portfolio.pdf
| tmsh wrote:
| Stephen Ross
| (https://en.wikipedia.org/wiki/Stephen_Ross_(economist) )'s books
| on APT / CAPM are pretty good too imho.
| a_c wrote:
| 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
| satellite2 wrote:
| 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.
| NickC25 wrote:
| >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.
| [deleted]
| smabie wrote:
| Yeah these are classic quant finance papers, but all in all not
| super helpful for anything except a basic foundation.
| mo_42 wrote:
| The author seems to imply that there's a Nobel Prize in
| economics. There is no such prize. There's only: Sveriges
| Riksbank Prize in Economic Sciences in Memory of Alfred Nobel
| sdfghswe wrote:
| akshually....
| Kranar wrote:
| What you mention is the Nobel Prize in economics, it's the same
| thing. It wasn't one of the original prizes set out in Nobel's
| will, but it is awarded by the same institution and follows the
| same procedure.
|
| Only an absolute pedant who is looking to argue trivialities
| would bicker over the name of "Nobel Prize in Economics" vs.
| "Sveriges Riksbank Prize in Economic Sciences in Memory of
| Alfred Nobel".
|
| [1] https://www.nobelprize.org/prizes/lists/all-prizes-in-
| econom...
| brickteacup wrote:
| > Only an absolute pedant who is looking to argue
| trivialities would bicker over the name of "Nobel Prize in
| Economics" vs. "Sveriges Riksbank Prize in Economic Sciences
| in Memory of Alfred Nobel".
|
| well this _is_ HN after all
| cgio wrote:
| There is some value to being pedantic. I did not know this
| fact about the economics Nobel and now I do.
| ants_everywhere wrote:
| > absolute pedant who is looking to argue trivialities would
| bicker
|
| Well, yes it's a more than a little pedantic, but I think
| your statement may be too strong.
|
| For example, at least one member of the Nobel family has
| objected to using their name on the prize:
|
| > Nobel accuses the awarding institution of misusing his
| family's name, and states that no member of the Nobel family
| has ever had the intention of establishing a prize in
| economics. [from Wikipedia]
|
| Also, while it's true that they're administered similarly, it
| also is true that they are funded from different sources. The
| Economics prize is funded by the (100% state-owned) central
| bank of a monarchy. Does that matter? Maybe not, but it's
| certainly a bit smelly and some of their picks in the past
| don't seem entirely justifiable solely on academic merit.
| mo_42 wrote:
| If you would establish a price and someone would pick up your
| name for another price, would that make you happy?
|
| Alfred Nobel did not establish a price in economics. So IMHO
| this price should not have his name. Sure, the official name
| is a bit bulky. We can certainly find something more
| appropriate.
| Satam wrote:
| Tesla did not establish electric veichile company and Max
| Planck did not, in fact, erect a building in my
| university's square.
| Kranar wrote:
| It's not a random person who picked up the name. Nobel
| established the various prizes in his will to be
| administered by certain committees and it is one of those
| committees that added the prize in economics to be awarded
| under the same criteria and at the same time as the other
| prizes.
|
| It is definitely notable that that the prize in economics
| is not one of the original prizes and I would never argue
| that it is. But acting like there is no strong relationship
| between the two that one would claim that a Nobel Prize in
| economics just doesn't exist is I think misguided. There is
| such a prize, it is not one of the original prizes and does
| have a different history, but it is strongly related to the
| other prizes.
| abetusk wrote:
| "... it is commonly referred to as the Nobel Prize in
| Economics." [0]
|
| [0]
| https://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Econom...
| martinmayer wrote:
| Hey there! I'm the author of the article. I just arrived here
| because I saw a crazy uptick on google analytics. I'm glad most
| of you liked the article.
| conformist wrote:
| 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...
| nsriv wrote:
| 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...
| starchild_3001 wrote:
| Thanks for sharing! My list of 12 most useful resources for
| machine learning quants can be found here:
| http://gokhanmergen.com/quantBibliography.html
|
| This list was compiled in 2009 before I took a full time job in
| an algorithmic trading company, but it's still relevant :) If
| anything ML is more relevant than ever in trading, except perhaps
| Deep Neural Nets, Transformers, Large Language Models etc are the
| norm today.
| oersted wrote:
| 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
| mydriasis wrote:
| 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?
| rgbgraph wrote:
| 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.
| mydriasis wrote:
| 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?
| chasd00 wrote:
| > 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 ;)
| ladberg wrote:
| I'd heavily advise _not_ to do what they 're recommending,
| and try out applying to trading firms if you want to break
| into the industry.
|
| I work at a trading firm and a decent number of our quants
| were all just programmers beforehand with no trading
| experience. Additionally, there's no downside to applying
| to a bunch of them and seeing if you get an offer, but
| there's a HUGE downside to gambling your own money in a
| field you don't understand.
|
| You could also do what I did and apply for a normal
| programmer role at a trading firm. Then you'll get some
| exposure to the quant world and if you want, you can try to
| pivot internally (I haven't done the last part and am not
| super interested, but plenty of people I know have).
| [deleted]
| martinmayer wrote:
| 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).
| FailMore wrote:
| Commenting to remind myself later
| Faaak wrote:
| FYI, you can click on the "favorite" button to add it to your
| list
| lockdown22 wrote:
| 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 options and hedging them
| isn't the 'Quant way' of profiting from options.
| JackFr wrote:
| 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.
| rgbgraph wrote:
| Table of contents? Blast from the SEO spam of the past.
|
| Snark aside, very decent bibliography for the intended audience:
| independent traders who are building automated trading programs
| for their personal accounts.
| Mochila wrote:
| I cannot open the link
| novosel wrote:
| No problem here.
|
| https://archive.is/DCm8e
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