Lead-Lag Relationships Between Industries of Developed Countries

Posted on February 4, 2023 By Harbourfront Technologies

In the financial markets, a lead-lag relationship is a type of correlation in which the performance of one asset precedes that of another. This means that when the price or performance of one asset increases or decreases, the price or performance of a second asset follows suit. This type of …

Diffusive Volatility and Jump Risks

Posted on January 29, 2023 By Harbourfront Technologies

Implied volatility is an estimation of the future volatility of a security’s price. It is calculated using an option-pricing model, such as the Black-Scholes model, as it takes into account various factors including the current price of the underlying asset and its strike price. Implied volatility helps investors to gauge …

How Accurate is Machine Learning Prediction in Finance?

Posted on January 26, 2023 By Harbourfront Technologies

Machine Learning (ML) is a type of Artificial Intelligence (AI) that provides computers with the ability to learn without being explicitly programmed. It focuses on the development of computer programs that can access data and use it to learn for themselves. The process of learning begins with observations or data, …

Factor Model for Delta-Hedged Options Returns

Posted on January 16, 2023 By Harbourfront Technologies

Options are contracts that allow traders to buy or sell a security at a predetermined price. Options give the holder the right, but not the obligation, to buy (call option) or sell (put option). They are traded on exchanges like stocks and have their own ticker symbols. Options can be …

Which System Has The Lowest Risk of Ruin?

Posted on January 1, 2023 By Harbourfront Technologies

Would you rather choose a trading system that wins small amounts most of the time but when it loses, the loss is big? Or would you rather choose a trading system that loses small amounts most of the time but when it wins, the gain is big? In this blog …

Do Commodities Lead the Equity Markets?

Posted on December 26, 2022 By Harbourfront Technologies

It is generally accepted that commodity prices can have an impact on equity markets, as the prices of commodities can affect the profitability and performance of companies in various sectors. For example, a rise in the price of oil may benefit companies in the energy sector, while a decline in …

Is the Momentum Anomaly Still Present in the Financial Markets?

Posted on December 23, 2022 By Harbourfront Technologies

In the financial markets, the momentum anomaly is a phenomenon in which financial assets that have had recent positive returns tend to continue performing well, while those with recent negative returns tend to keep declining. It is also known as the ‘momentum effect’ and has been observed in stocks, commodities, …

Pricing Options In The Real-World Measure

Posted on December 20, 2022 By Harbourfront Technologies

Option pricing is usually carried out in the risk-neutral world where the market participants are assumed to be indifferent between taking a certain payoff or investing in an asset with that same expected return. Mathematically, an option’s price is the expected value of its payoff in the risk-neutral measure discounted …

Trading Butterfly Option Positions: a Long/Short Approach

Posted on December 17, 2022 By Harbourfront Technologies

A butterfly option position is an advanced trading strategy that requires a combination of calls and/or puts with three different strike prices of the same maturity. It’s a non-directional options trading strategy that is commonly used when an investor believes that the underlying asset’s price will remain relatively stable in …

How Credit Risks Affect Momentum Strategies Returns

Posted on December 14, 2022 By Harbourfront Technologies

Credit risk is the probability of loss from a borrower or counterparty. It is also known as default risk and refers to the potential that an entity may not be able to meet its obligations when due. Credit risk can arise from various sources including individual borrowers, companies, government entities, …