This article is the first in Trading the Network, a seven-part series investigating whether relationships across financial assets contain predictive information that can ultimately be converted into tradable signals. Part I establishes the baseline by asking whether a simple network of historical return correlations
Download PDF Introduction Whenever approaching Quant Trading it is crucial to be aware that the benefit of each trade we make needs to overcome the cost of trading. Transaction cost models are a way to quantify the cost of making a trade of a given size so that the information Read more…
Download PDF Introduction In this fourth episode of the Backtesting Series, we will get into Portfolio Construction & Portfolio Optimization processes with a deep focus on MVO. If you haven’t already, we recommend reading the first three episodes before proceeding with this article. Please note that the series will include Read more…
Download PDF Introduction As announced in our previous episode, the second article in our Backtesting series will discuss Cross Validation and introduce a new Backtesting strategy, first presented by Giuseppe Paleologo (2024). If you haven’t already, we recommend reading the first episode before proceeding with this article. Please note that Read more…
Download PDF Introduction In this article, we present the first episode of a series on backtesting. We want to provide the reader with an immersive analysis of this powerful tool and analyze all the processes that lead to its optimization and implementation. The series will consist of the following parts: Read more…
Download PDF Introduction There is empirical evidence that index options, especially puts, are overpriced relative to individual stock options. Dispersion trading is a strategy aimed to capitalize from this mispricing. The aim of this article is to explore whether dispersion trading can still generate positive returns, but to generate a Read more…
Download PDF Introduction: Rebalance Timing Luck Every trading strategy has some turnover in its portfolio constituents; otherwise, it would simply be a buy-and-hold strategy. Equally, every index has some periodical rebalancing (and turnover) in its constituents. Often, the point in time at which this reshuffling of the portfolio takes place Read more…
Download PDF Introduction When managing a portfolio, the fundamental problem is to find investments with excess risk-adjusted expected rates of return. Once the manager has identified some favourable opportunities and is ready to assemble the portfolio, they still need to decide how much capital, as a fraction of the value Read more…
Download PDF Introduction In this article, we discuss an equity Pairs Trading strategy using the S&P 500 index components. Pairs Trading is a statistical arbitrage strategy that involves simultaneously taking long and short positions in two financial assets, expecting their spread to converge to the mean. However, the process of Read more…
Download PDF Introduction Statistical arbitrage is a class of trading strategies that profit from exploiting what are believed to be market inefficiencies. These inefficiencies are determined through statistical and econometric techniques. Note that the arbitrage part should by no means suggest a riskless strategy, rather a strategy in which risk Read more…