This is a summary of links featured on Quantocracy on Wednesday, 01/20/2021. To see our most recent links, visit the Quant Mashup. Read on readers!
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An Introduction to Cointegration for Pairs Trading [Hudson and Thames]Cointegration, a concept that helped Clive W.J. Granger win the Nobel Prize in Economics in 2003 (see Footnote 1), is a cornerstone of pairs and multi-asset trading strategies. Anecdotally, forty years have passed since Granger coined the term cointegration in his seminal paper Some properties of time series data and their use in econometric model specification (Granger, 1981), yet one
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Avoiding Gap Trades [Alvarez Quant Trading]Should you avoid trades that have recently gapped? What if you are trading a mean reversion strategy and a stock has recently had a large gap? Is that a good trade to take? Avoid? Does it depend on the direction of the gap? I did research on this about 15 years ago. Lets see what the current research says. Definition of Gap and Lap A gap is when a stock opens above the previous days high or
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Volatility as an essential risk metric [Trade With Science]In this article, we will explain the basic concept of volatility, what it is, how it is calculated, implied and historical volatility, and how to model it. I believe youve already heard about volatility, so we dont want to just copy and paste the information you already know. In our articles, we are always trying to go through more exciting stuff for you. Before we dive deeper into