【Trading 101】Notes on Successful Algorithmic Trading Part I: Idea Sourcing & Basic Modeling

最新推荐文章于 2024-05-05 00:00:21 发布

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最新推荐文章于 2024-05-05 00:00:21 发布

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分类专栏： QuantTrading 文章标签：数据建模

本文链接：https://blog.csdn.net/AdamNi_NintyNine/article/details/121926698

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2 篇文章 4 订阅

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I. Idea Sourcing

A. Textbooks

Trading and Exchanges: Market Microstructure for Practitioners by Larry Harris. Market participants & motives, how trades are carried out in detail.
Algorithmic Trading: Winning Strategies and Their Rationale by Ernest Chan. A second to the famous How to Build Your Own Algorithmic Trading Business. Mean reversion, momentum, and reflections on market conditions.
Volatility Trading by Euan Sinclair. Volatility modelling/forecasting & option strategy implementation.

B. Internet

Blogs:

Quantitative Trading (Ernest Chan). http://epchan.blogspot.com
Quantivity. http://quantivity.wordpress.com
Quantopian. http://blog.quantopian.com
Quantpedia. Homepage - QuantPedia

Aggreagators:

Quantocracy. Quant Mashup - Quantocracy
Quant News. Algorithmic Trading - FXCM Markets
Algo Trading Sub-Reddit: http://www.reddit.com/r/algotrading

Forums:

Elite Trader Forums: http://www.elitetrader.com
Nuclear Phynance: Nuclear Phynance

C. Journals

Journal of Investment Strategies http://www.risk.net/type/journal/source/journalof-investment-strategies

Questions to ask about strategies:

Easy to understand?
Too many paramters?
Prelimary PnL & Risk-reward?

II. Simple Time Series Modeling

A. Evaluating Mean-reversion through ADF(p = 1)

A simple formula capturing "change in x is in proportion to its distance to the mean":

$dx_t = \theta(\mu - x_t)dt + \sigma dW_t$

Augmented Dicky Fuller test of order p tests whether $\gamma = 0$ in the follwing set up:

$\Delta y_t = \alpha + \beta t + \gamma y_{t-1} + \delta_1 \Delta y_{t -1 } + ... + \delta_{p-1} \Delta y_{t - p +1 } + \epsilon_t$

When p = 1, the above set up is simply

$\Delta y_t = \alpha + \beta t + \gamma y_{t-1} + \epsilon_t$ .

So for any demeaned series, ADF with p = 1 is a test of mean reversion. Passing the ADF means there's some evidence for mean reversion.

statsmodels.tsa.stattools.adfuller provides testing functionality in python.

B. Hurst Exponent << 0.5 for stationarity

The key insight is that any stationary time series diffuses slower than GBM. Hurst exponent measures stationarity, thus a very small hurst index means strong stationarity.

For any price series with no drift, approximately

$Var(r_{\tau}) = \Sigma \text{Returns over Tau Length intervals}^2$

For GBM,

$Var(r_{\tau}) \approx \tau = \tau^{2 \times 0.5}$ .

So for GBM H is 0.5. If H is small, the variance is small, the series diffuses very slowly, fitting the profile of stationarity (again, not proving, but good evidence).

C. Cointegration Test: Regress then test stationarity

Cointegration means there exists a $\beta$ , such that $\epsilon(t)$ is stationary in

$y(t) = \beta x(t) + \epsilon(t)$ .

We first find the $\beta$ through a linear regression. Visual justification is normally needed. Then we test the residual's stationarity.

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【Trading 101】Notes on Successful Algorithmic Trading Part I: Idea Sourcing & Basic Modeling

【Trading 101】Notes on Successful Algorithmic Trading Part I: Idea Sourcing & Basic Modeling
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