This is a summary of links featured on Quantocracy on Wednesday, 09/02/2020. To see our most recent links, visit the Quant Mashup. Read on readers!
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Denoising a signal with HMM [Tr8dr]Most signals I deal with are noisy, reflecting noise of underlying prices, volume, vol of vol, etc. Many traditional strategies built on such indicators might either: use signal to scale into position such approaches have to deal with noise to avoid thrashing, adjusting position up and down with noise consider specific levels of the signal to signify a state for example: long {+1}, short {-1},
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Forecast linearity and forecasting mean reverting volatility [Investment Idiocy]This is a blog post about forecasting vol. This is important, since as sensible traders we make forecasts about risk adjusted returns (as in my previous post), which are joint forecasts of return and volatility. We also use forecasted vol to size positions. A better vol forecast should mean we end up with a trading strategy that has a nicer return profile, and who knows maybe make some more money.