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Use of Machine Learning in Pairs Trading

Posted on October 3, 2024 By 
Machine learning has become an essential tool in modern finance, transforming the way financial institutions and investors approach data analysis and decision-making. In areas such as portfolio management, algorithmic trading, credit scoring, and fraud detection, machine learning enables more accurate predictions, faster processing of information, and the automation of tasks …
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Term Structure of VIX Futures

Posted on September 29, 2024 By 
VIX futures are financial derivatives that allow traders to speculate on or hedge against future volatility in the stock market, specifically the S&P 500 index. They are based on the CBOE Volatility Index (VIX), which measures market expectations of near-term volatility. Unlike spot VIX, which reflects current market volatility, VIX …
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Beta Arbitrage Around Macroeconomic Announcements

Posted on September 21, 2024 By 
The macroeconomic announcement premium refers to the phenomenon where financial markets, particularly stock and bond markets, experience higher-than-usual returns on days when significant macroeconomic announcements are made. The premium represents the additional returns investors may receive due to increased trading activity, market reactions, or adjustments to expectations following these announcements. …
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Enhancing Volatility Portfolio Returns with VRP Timing

Posted on September 9, 2024 By 
The volatility risk premium (VRP) refers to the compensation investors receive for bearing the risk of higher-than-expected market volatility, often manifesting as the difference between implied and realized volatility in options markets. The VRP is not constant; it changes according to the market regime. Reference proposed a timing scheme …
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Using Hurst Exponent to Time the Market

Posted on September 5, 2024 By 
The Hurst exponent is a statistical measure used to evaluate the long-term memory or autocorrelation of a time series, indicating whether a system exhibits trending behavior, mean-reverting characteristics, or randomness. A Hurst exponent greater than 0.5 signifies the existence of long-range dependence, implying that previous trends are prone to persisting …
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Predicting Intraday and Daily Volumes Using ARIMA Model

Posted on September 1, 2024 By 
Volume is an essential, integral market data. However, it receives much less attention in research literature compared to price data. Understanding and being able to model volume dynamics is important because buy-side firms must plan and time their trades to avoid significantly impacting the market, revealing their identities, and incurring …
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