This is a summary of links featured on Quantocracy on Monday, 08/09/2021. To see our most recent links, visit the Quant Mashup. Read on readers!
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Extended Optimal Arbitrage Strategies [Hudson and Thames]In our previous article, weve discussed a couple of trading strategies exploiting arbitrage between similar stocks using stochastic optimal control methods. A major shortcoming of those approaches is that we restricted ourselves to constructing delta-neutral portfolios. Along with this, the ratio between the stocks in the portfolio is fixed at the start of the investment timeline. These
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Building an Inflation Portfolio Using Stocks [Factor Research]An inflation portfolio can be created by systematically selecting stocks correlated to inflation This would have resulted in a portfolio with strong sector and factor biases However, the correlation to inflation would not have been significantly higher than for stocks overall INTRODUCTION Measuring inflation is as challenging as calculating our body weight changes using only a mirror. We might
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Should you Trade with the Kelly Criterion? [Raposa Trade]The Kelly Criterion gives an optimal result for betting based on the probability of winning a bet and how much you receive for winning. If you check out Wikipedia or Investopedia, youll see formulas like this: f=p1pb1f^{*} = p – frac{1-p}{b-1} f=pb11p which gives you the optimal amount to bet (ff^*f) given the probability of winning (p) and the payout youre
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Machine learning for portfolio diversification [SR SV]Dimension reduction methods of machine learning are suited for detecting latent factors of a broad set of asset prices. These factors can then be used to improve estimates of the covariance structure of price changes and by extension to improve the construction of a well-diversified minimum variance portfolio. Methods for dimension reduction include sparse principal components analysis,