This is a summary of links recently featured on Quantocracy as of Saturday, 02/15/2025. To see our most recent links, visit the Quant Mashup. Read on readers!
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Dangers of Relying on OHLC Prices the Case of Overnight Drift in GDX ETF [Quantpedia]Can we truly rely on the opening price in OHLC data for backtesting? While the overnight drift effect is well-documented in a lot of asset classes, we investigated its presence in gold using the GLD ETF and then extended our analysis to the GDX Gold Miners ETF, where we observed an unusually strong overnight return exceeding 30% annualized. However, when we tested execution at 9:31 AM using
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Modelling the yield curve of US government treasuries [OS Quant]The interest rate is a key input to pricing various instruments. For example, the price of an option depends on the risk free rate. The return earned holding bonds depends on the bond yield. A good model of interest rates means you can better price these interest rate derived products and have a beter idea of risk. The fiddly thing is that there is no one single interest rate. The yield that you
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The Ability to NAV Time Interval Funds [Alpha Architect]Highly illiquid assets trade infrequently making it difficult to know their true market value. To address this issue, funds that invest in illiquid assets create fair valuation estimates at periodic intervals. These valuation estimates determine the share values at which interval and tender offer funds issue and redeem their shares. Because the true value is uncertain, wealth transfers can be
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Research Review | 14 FEB 2025 | Rebalancing and Asset Allocation [Capital Spectator]The Unintended Consequences of Rebalancing Campbell R. Harvey (Duke University), et al. January 2025 Institutional investors engage in trillions of dollars of regular portfolio rebalancing, often based on calendar schedules or deviations from allocation targets. We document that such rebalancing has a market impact and generates predictable price patterns. When stocks are overweight, funds sell
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The VIX of Crypto and How Options Data Predicts BTC Price Swings [Unravel Markets]The interactive version of this report can be found here; our previous report on exchange outflowss predictive power here. With investor sentiment and risk premiums encapsulated in its options data, Bitcoins implied volatility is becoming an interesting predictive factor with its dual role as a fear gauge and a proxy for speculative behavior. Implied Volatility (IV)a metric derived from
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Hedging Efficiently: How Optimization Improves Tail Risk Protection [Relative Value Arbitrage]Tail risk hedging aims to protect portfolios from extreme market downturns by using strategies such as out-of-the-money options or volatility products. While effective in mitigating large losses, the challenge lies in balancing cost and long-term returns. In this post, well discuss tail risk hedging and whether it can be done at a reasonable cost. Tail Risk Hedging Strategies: Are They