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Change of Measure/Girsanov’s Theorem Explained

Change of Measure or Girsanov’s Theorem is such an important theorem in Real Analysis or Quantitative Finance. Unfortunately, I never really understood it until much later after having left school. I blamed it to the professors and the textbook authors, of course.  The textbook version usually goes like this. Given a probability space \({\Omega,\mathcal{F},P}\), and …

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Trading and Investment as a Science

Here is the synopsis of my presentation at HKSFA, September 2012. The presentation can be downloaded from here. 1. Many people lose money playing the stock market. The strategies they use are nothing but superstitions. There is no scientific reason why, for example, buying on a breakout of the 250-day-moving average, would make money. Trading …

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Data Mining

The good quant trading models reveal the nature of the market; the bad ones are merely statistical artifacts. One most popular way to create spurious trading model is data snooping or data mining. Suppose we want to create a model to trade AAPL daily. We download some data of, e.g., 100 days of AAPL, from …

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The Role of Technology in Quantitative Trading Research

I posted my presentation titled “The Role of Technology in Quantitative Trading Research” presented in HKU-HKUST-Stanford Conference in Quantitative Finance. Dec 9, 2011. Workshop On Recent Developments Of Financial Mathematics (REDFIN2011). Dec 13, 2011. You can find the powerpoint here. Abstract: There needs a technology to streamline the quantitative trading research process. Typically, quants/traders, from …

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Mean Reversion vs. Trend Following

AlgoQuant 0.0.5 just got released! This release is particularly exciting because you no longer need a license to use AlgoQuant. AlgoQuantCore now disappears forever. The source of the entire AlgoQuant project is now available: http://www.numericalmethod.com/trac/numericalmethod/browser/algoquant Maybe even more exciting is that we ship this release with two quantitative trading strategies: one mean reversion strategy and …

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Quantitative Trading: Economist Approach vs. Mathematician Approach

Thank you Lewis for introducing me to the field of “Quantitative Equity Portfolio Management”. It opens my eyes to the other spectrum of “Quantitative Trading.” Apparently what Lewis considers quantitative trading is very different from what I consider quantitative trading. I call the former an economist approach and the latter a mathematician approach. This blog …

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Strategy Optimization

Trading strategy optimization is an important aspect and a challenging problem in algorithmic trading. It requires determining a set of optimal solutions with respect to multiple objectives, where the objective functions are often multimodal, non-convex, and non-smooth. Moreover, the objective functions are subject to various constraints of which many are typically non-linear and discontinuous. Conventional …

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