tag:blogger.com,1999:blog-35364652.post165118879875919747..comments2024-03-22T10:29:59.088-04:00Comments on Quantitative Trading: Things You Don't Want to Know about ETFs and ETNsErnie Chanhttp://www.blogger.com/profile/02747099358519893177noreply@blogger.comBlogger37125tag:blogger.com,1999:blog-35364652.post-44018922569680730802017-04-24T07:04:58.265-04:002017-04-24T07:04:58.265-04:00Hi Luke,
Thank you for your interest. Please visit...Hi Luke,<br />Thank you for your interest. Please visit epchan.com/workshops for details.<br />ErnieErnie Chanhttps://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-1493257081422817062017-04-24T05:47:33.552-04:002017-04-24T05:47:33.552-04:00i'd love to attend one of your workshops. Wher...i'd love to attend one of your workshops. Where can I get more info please?<br /><br />Luke from <a href="http://www.howsmartareu.com" rel="nofollow">trading secrets</a>Luke Farrugiahttps://www.blogger.com/profile/03574081287662036348noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-38378382377094260302017-02-07T12:23:25.597-05:002017-02-07T12:23:25.597-05:00Hi Ernie,
Thanks for the quick comment. Yes, and ...Hi Ernie,<br /><br />Thanks for the quick comment. Yes, and the discrepancy is more visible during any period when the underlyng's return is flat. I haven't look into the reason for the relationship but I suspect transaction costs are a big part of it.<br /><br />Thank you very much for your insights, very glad I found this blog.<br /><br />RayRay Zhunghttps://www.blogger.com/profile/17129578578537294483noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-85170939633966936672017-02-06T16:23:14.281-05:002017-02-06T16:23:14.281-05:00Hi Ernie,
Thanks for your quick comment. Yes, and...Hi Ernie,<br /><br />Thanks for your quick comment. Yes, and imo slippage is even more visible when you compare the performance of the leveraged ETP during any period when the underlying index's return is almost flat. But this quality is indeed path dependent, theoretically the "slippage" will turn into a compounding surplus when the security has consecutive movements in one direction (obviously not realistic over longer period of time).<br /><br />I haven't looked into the reason but I suspect transaction costs is a big part of it. Ray Zhunghttps://www.blogger.com/profile/17129578578537294483noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-85639328554155142052017-02-06T15:27:28.062-05:002017-02-06T15:27:28.062-05:00Hi RayRay,
Great points!
Just for clarification: ...Hi RayRay,<br />Great points!<br /><br />Just for clarification: when you said "beta slippage", are you referring to the discrepancy between the long term (not daily) growth rate of levered ETP vs. the long-term growth rate of the unlevered ETP multiplied by the leverage?<br /><br />Interesting observation that tracking error is linearly proportional to volatility. I imagine that is due to the transaction costs of frequent intraday rebalancing?<br /><br />Ernie<br /><br />Ernie Chanhttps://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-62382741958604461862017-02-06T14:55:41.877-05:002017-02-06T14:55:41.877-05:00To comment on what Lauri said earlier, the discrep...To comment on what Lauri said earlier, the discrepancies you witnessed between leveraged ETPs and their underlying indices really have 2 components: the first one is beta slippage, which is inevitable for products that only track day-to-day returns, even if the ETP tracks its underlying perfectly the slippage will still occur and it has a path-dependent quality. I believe Euan Sinclair talked about this in his book "Volatility Trading". The second component is the actual tracking error, this is very easy to model as you can simply compare the return of a perfectly tracking model of a index to the return of the actual ETP that has the same leverage. For highly volatile ETPs such as the JNUG & JDST pair, the tracking error alone can be more that 60% annually. There's also an observable linear relationship between the tracking errors of leveraged ETPs and the volatilities of their underlying indices. Low volatility pairs such as the SPXL and SPXS almost have no tracking error over a one year period. Ray Zhunghttps://www.blogger.com/profile/17129578578537294483noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-57591187428511806762016-08-15T09:13:12.598-04:002016-08-15T09:13:12.598-04:00Hi Ernie,
Thank you for quick response.
However,...Hi Ernie,<br /><br />Thank you for quick response.<br /><br />However, in m(t) = m(t-1) + w(t-1),<br /><br />at time t, w(t-1) is realized, not random anymore, which is weird.<br /><br />I prefer m(t) = m(t-1) + w(t), making more sense, time index of white noise should be consistent with that of dependent variable.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-61423945694413239592016-08-15T07:02:17.446-04:002016-08-15T07:02:17.446-04:00w is a Gaussian noise term. There is no time serie...w is a Gaussian noise term. There is no time series model for how it evolves, and you can consider it as serially uncorrelated. Hence it doesn't matter whether you use w(t) or w(t-1).<br /><br />ErnieErnie Chanhttps://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-69044896263780191672016-08-15T01:48:27.682-04:002016-08-15T01:48:27.682-04:00hi Ernie,
In Kalman filter, in the state equation...hi Ernie,<br /><br />In Kalman filter, in the state equation, I find there are two kinds of version in references, they are<br /><br />m(t) = m(t-1) + w(t-1), and<br />m(t) = m(t-1) + w(t), <br /><br />I am confused here.<br /><br />Do you know the difference between them?<br />Thanks.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-13968805378961907582016-07-11T14:04:01.850-04:002016-07-11T14:04:01.850-04:00QuantCon has given me these special links for our ...QuantCon has given me these special links for our readers here:<br /><br />"Quantitative Trading in Eurodollar Futures Market" by Edith Mandel:<br />Video https://vimeopro.com/user7561422/quantcon-2016-videos/video/164045995 (Enter password: WeLoveQuantsQ2016!)<br />Slide Presentation https://www.slideshare.net/secret/se7g2urie9h3xp<br /><br />Enjoy!<br />ErnieErnie Chanhttps://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-57093879574701292102016-07-10T19:00:31.595-04:002016-07-10T19:00:31.595-04:00Sure, MOO order is executed during the closing auc...Sure, MOO order is executed during the closing auction. Nobody pays bid-ask spread.<br />IB or any broker will just route it to the exchange for this auction. But note that you need to submit this order 10 minutes or more ahead of the close (based on NYSE or Nasdaq rules).<br /><br />ErnieErnie Chanhttps://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-39084850374963545412016-07-10T17:31:44.979-04:002016-07-10T17:31:44.979-04:00Hi Ernie,
If we send MOO in IB TWS, could we save...Hi Ernie,<br /><br />If we send MOO in IB TWS, could we save bid-ask spread?<br /><br />How does IB handle MOO?<br /><br />Thanks.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-4437081433663178922016-07-09T06:51:00.047-04:002016-07-09T06:51:00.047-04:00It would be best if you direct this question to Qu...It would be best if you direct this question to QuantCon's organizer Quantopian.com. <br /><br />ErnieErnie Chanhttps://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-33487605402651390612016-07-08T10:29:51.616-04:002016-07-08T10:29:51.616-04:00Hi Ernie,
Sounds great!
Where can we watch "...Hi Ernie,<br /><br />Sounds great!<br /><br />Where can we watch "Quantitative Trading in the Eurodollar Futures Market" by Edith Mandel?<br /><br />ThanksAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-49200626095570721102016-07-08T10:13:11.897-04:002016-07-08T10:13:11.897-04:00To my knowledge, only Eurodollar futures has pro-r...To my knowledge, only Eurodollar futures has pro-rata matching on CME. You should watch the talk by Dr. Edith Mandel at QuantCon 2016. It was an amazing talk on trading the ED market.<br /><br />ErnieErnie Chanhttps://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-50826823791767820032016-07-08T09:51:08.866-04:002016-07-08T09:51:08.866-04:00Hi Ernie,
Are all US bond futures pro-rata matchi...Hi Ernie,<br /><br />Are all US bond futures pro-rata matching?<br /><br />How do we know they are pro-rata matching?<br /><br />Thanks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-34415488193678401202016-07-08T09:42:49.471-04:002016-07-08T09:42:49.471-04:00No, we haven't tried that yet.
ErnieNo, we haven't tried that yet.<br />ErnieErnie Chanhttps://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-61119186102240473362016-07-08T09:37:17.374-04:002016-07-08T09:37:17.374-04:00Hi Ernie,
Do you trade "join the bid" h...Hi Ernie,<br /><br />Do you trade "join the bid" high-frequency strategy in your book for futures?<br /><br />Thanks.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-78518632508279010022016-07-08T07:11:04.358-04:002016-07-08T07:11:04.358-04:00Please see the book by Cartea et al. on Algorithm ...Please see the book by Cartea et al. on Algorithm and High Frequency Trading on my Recommended Books list on the right sidebar.<br /><br />ErnieErnie Chanhttps://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-46981996099505045222016-07-08T03:22:18.614-04:002016-07-08T03:22:18.614-04:00Hi Ernie,
Would you please recommend some papers ...Hi Ernie,<br /><br />Would you please recommend some papers about order book trading strategies?<br /><br />Thanks.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-20773880000328564162016-07-04T06:46:52.009-04:002016-07-04T06:46:52.009-04:00Excess returns mean returns minus risk free rate.
...Excess returns mean returns minus risk free rate.<br /><br />ErnieErnie Chanhttps://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-13031347978274858772016-07-04T03:36:40.805-04:002016-07-04T03:36:40.805-04:00Hi Ernie,
In your second book, you talk about int...Hi Ernie,<br /><br />In your second book, you talk about interday momentum strategies, and you mention a "Time series momentum" paper written by Moskowitz, Yao, and Pedersen, 2012.<br /><br />I find that in their paper, they use "excess return" to build the momentum strategy.<br /><br />Do you know what is the definition of "excess return" in their paper?<br /><br />Thanks.<br /><br /> Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-19805088499209636922016-07-01T09:48:25.064-04:002016-07-01T09:48:25.064-04:00Yes, you are.
ErnieYes, you are.<br />ErnieErnie Chanhttps://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-49730973274447598852016-07-01T09:11:13.292-04:002016-07-01T09:11:13.292-04:00Hi Ernie,
If we send in a Market On Close order, ...Hi Ernie,<br /><br />If we send in a Market On Close order, are we guaranteed to get filled at close price?<br /><br />Thanks.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-45814321206996044112016-06-30T20:31:16.396-04:002016-06-30T20:31:16.396-04:00If you send in a Market On Open order, you are gua...If you send in a Market On Open order, you are guaranteed to get filled at open price, unless you are buying millions of shares.<br /><br />ErnieErnie Chanhttps://www.blogger.com/profile/02747099358519893177noreply@blogger.com