This is a summary of links featured on Quantocracy on Wednesday, 04/22/2020. To see our most recent links, visit the Quant Mashup. Read on readers!
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Market Cap vs. Crash Severity [Alvarez Quant Trading]Has the market sell-off and subsequent bounce treated all stocks the same? A good portion of the bull market move from 2009 to 2019 has been led by the big-cap stocks. Did they hold up better during the March sell-off? What about with the bounce? Did the smaller-cap stocks have a bigger bounce? The Setup February 19 At the S&P 500 high on February 19, I took all 503 stocks in the index and
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Hedging an Option through the Black-Scholes model in discrete time [Quant Dare]The Black-Scholes formula can be used to create a hedge for an option. However, this model is derived in continuous time. What happens when we use it to hedge an option in discrete-time? European options are financial securities which give their holder the right (but not the obligation) to buy or sell an asset (called the underlying asset) at a predetermined price (called the strike price) at a
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Geek Note: How to Properly Lag Monthly Economic Data [Allocate Smartly]Well be talking about Paul Novells flagship SPY-COMP strategy on the blog tomorrow. The strategy uses monthly economic data, like the kind available from the FRED database. Weve covered a handful of strategies like this in the past (think Philosophical Economics Growth Trend-Timing). Whenever we do, we invariably get a ton of questions, because it can be confusing to determine how to
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How to Compute Active Share [Alpha Architect]In the short video below, I show how to compute Active Share. The accompanying excel file with the formulas can be found here. I start by computing the active share for two hypothetical funds, and then examine the active share of a few live ETFs.