gs quantify iitm

8/20/2019 GS Quantify IITM

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GS Quantify October 25, 2013 HauntQuant, IIT Madras

GS QUATI!" Tea# HauntQuant

October 25t$, 2013

An%it

&e$ura

'ayant T$atte ( itis$

(u#ar


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)*O&+M 1A-.orit$#ic Tradin.


3/27

)rob-e# 1 / A-.orit$#ic Tradin.

Oerie

Compute

ModifyTrade


• o#ute t$e ra a#ount to betraded 4A0 for t$e current ti#e instant

• Modify t$e ra a#ount based on• 6earture of rice fro# -oca-

a.7• S-oe of t$e rice cure• 2nd deriatie of t$e rice cure

• 8ercise trade based on• de#and 9 su-y• #odi:ed a#ount to be so-d

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4/27

Modifyin. *a Quantity; Mode-s

I6earture;

• +inear Mode-

• is -i#ited beteen 0 and

•



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A0


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Modifyin. *a Quantity; Mode-s

II• 8


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Usin. )redictions



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• Quadratic :t 1st and 2nd deriaties

• T$e departure (d) fro# t$e reious #ode-s is#odi:ed usin. t$e redictor

•


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Ot$er onsiderations I



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• *T+• (ee #onitorin. rices= don>t trade

• Modify A0 once *T+ is oer

• Trade -i#its• After co#utin. a#ount to be so-d, on-y se-- as #uc$ as

?ossib-e@

• &uy 9 Se--• T$e a-.orit$# a-ays so-es se-- rob-e#

• &uy rob-e# is easi-y conerted to se-- rob-e# byinertin. t$e rice cure


8/27

Ot$er onsiderations II• Mu-ti-e e8c$an.es 4a-.orit$#

17 6e:ne a ne ti#e series t$at is #a8i#u# of t$e ricesacross a-- e8c$an.es at eac$ ti#e instant

27 Usin. t$e ra a#ount to be traded 4 A0, co#ute t$e

actua- a#ount to be traded 4 A usin. t$e c$osen #ode-37 Trade aay as #uc$ of A as ossib-e on t$e e8c$an.e

it$ best rice

7 Subtract t$e traded a#ount fro# A0

57 Hain. e8$austed t$e ?best@ e8c$an.e, re-ace t$e

current rice of t$e security it$ t$e ne8t best aai-ab-ecurrent rice

B7 Usin. t$is ne current rice and t$e ne A0 co#uted in

ste , co#ute t$e ne a#ount to be co#uted

C7 ontinue t$is rocess ti-- t$e desired a#ount 4ori.ina- A0

is traded or a-- e8c$an.es are e8$austed



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9/27

*esu-ts



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I II


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)rob-e# I; onc-usion

• 6earture #ode-s• Greater stabi-ity

• &etter aera.e erfor#ance

• Generic

• )redictie #ode-s• T$e siDe of indo for rediction deends on t$e security

• Oera-- erfor#ance is .ood= can erfor# ery bad inseci:c cases

• Mode- c$oice deends on inestor ro:-e• +o ris% #ode-s; 6earture #ode-s

• Hi.$ ris% #ode-s; )redictie #ode-s



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11/27GS Quantify October 25, 2013 HauntQuant, IIT Madras

)*O&+M 2rror 6etection in )rices


12/27

&rea%s; 6etection

)rob-e# 2 / rror 6etection in )rices


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PriceSeries

• T$e ti#e series of t$e rice of a certain stoc%

JumpSeries • !ind Eu# 4 in rice for eac$ day

• !ind #ean and standard deiation of t$e Eu#s 4

Norm

jump

• or#a-iDed 'u#

Break

• If t$e nor#a-iDed Eu# is outside F3 si.#a, dec-arebreak

PriceSeries

• T$e ti#e series of t$e rice of a certain stoc%

JumpSeries • !ind Eu# 4 in rice for eac$ day

• !ind #ean and standard deiation of t$e Eu#s 4

Norm

jump

• or#a-iDed 'u#

Break

• If t$e nor#a-iDed Eu# is outside F3 si.#a, dec-arebreak

b- / i i i


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&rea%s; *an%in.• Securities in ortfo-io

• 6ecreasin. order of c$an.e in do--ar a-ue of t$e ortfo-io

• Securities not in ortfo-io• 6ecreasin. order of #a.nitude of nor#a-iDed Eu#

• Securities $ic$ are in ortfo-io are a-ays ran%ed$i.$er



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A

&&rea%s

Stoc%S-it

&rea%

InaccurateHistorica- 6ata

) b- 2 / 6 i i ) i


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Stoc% S-its

• ect; n-for-1 s-it• o7 of stoc%s n4O-d no7 of stoc%s= Stoc% rice 4O-d stoc%

rice 9 n

• )urose

• Jery $i.$ stoc% rice• S#a-- inestors can>t aord t$e stoc%

• Stoc% s-it• More eo-e can aord t$e stoc%

• 6e#and rises, -iKuidity rises

• 6etection• )rice *atio )rice4d


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Security -assi:cation

• -assi:cation based on 2 ara#eters• Mean and Jariance

• %


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%


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Accuracy of Historica- 6ata

Correlaio!

• !or eac$ stoc%, co#ute corre-ation it$ t$e #ar%et 4

"#pece$%o&eme

!

• o#ute e8ected #oe#ent 4$ence rice %noin.

• Mar%et #oe#ent for t$at day• a-ue for t$e stoc%

Jump

• 6e:ne• 'u# corresonds to uncorre-ated #oe#ent

Break

• 6ec-are brea% usin. t$e nor#a-iDed Eu# aroac$ #entionedear-ier

• or#a-iDed Eu# outside F3 is dec-ared as inaccurate data

Correlaio!

• !or eac$ stoc%, co#ute corre-ation it$ t$e #ar%et 4

"#pece$%o&eme

!

• o#ute e8ected #oe#ent 4$ence rice %noin.

• Mar%et #oe#ent for t$at day• a-ue for t$e stoc%

Jump

• 6e:ne• 'u# corresonds to uncorre-ated #oe#ent

Break

• 6ec-are brea% usin. t$e nor#a-iDed Eu# aroac$ #entionedear-ier

• or#a-iDed Eu# outside F3 is dec-ared as inaccurate data



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)rob-e# 2 / rror 6etection in )rices 18 / 27


18/27

Mar%ets ast rice a-one

• *eort t$e nu#ber of stoc%s t$at $ae brea%s• If #aEority of stoc%s $ae brea%s on a certain day, dec-are

#ar%et


19/27GS Quantify October 25, 2013 HauntQuant, IIT Madras

)*O&+M 3Monte ar-o in 6eriatie )ricin.

)rob-e# 3 / Monte ar-o in 6eriatie )ricin. 20 / 27


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)rob-e# 3; Oerie

• )oisson )rocess

$ere,y L1 it$y


21/27

Ana-ytica- So-ution

)rob-e# 3 / Monte ar-o in 6eriatie )ricin.


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• )oisson Arria-s

• Assu#in. eKua- robabi-ities forbot$ 40 1 and 40


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Monte ar-o So-ution



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1

• Generate e8onentia--ydistributed ti#e sa#-es

su##in. to N1

2• reate )at$; Introduce a

direction i at eac$ eent

3

• *eeat 1 P 2 to .enerate#any at$s for Montear-o Si#u-ation

td



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o#ute )ara#eters

• Aera.in. oer a-- t$esi#u-ation at$s

• Sy##etric )at$s• N *educed Sa#-e Sace

• *e


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)ara#eter 8traction



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• Gien,

To e8tract ; R ,

•



25/27



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8tract

• Inters

e8onentia--ydistributed it$ara#eter R

8tract

•

)ara#eter 8traction

t i

Results)ara#eter 8tracted

Ja-ue

075B9year

75C er year

Results)ara#eter 8tracted

Ja-ue

075B9year

75C er year


26/27


THA( "OUQuestions

*eferences 27 / 27


27/27

*eferences17 'an Iar +arsen, ?)redictin. Stoc% )rices Usin. Tec$nica- Ana-ysis and

Mac$ine +earnin.@, ore.ian Uniersity of Science and Tec$no-o.y

27 T7 6ai et. al., ?Auto#ated Stoc% Tradin. usin. Mac$ine +earnin.A-.orit$#s@, Stanford Uniersity

37 67 Mo-doan et. al., ?A Stoc% Tradin. A-.orit$# Mode- )roosa-, based on Tec$nica- IndicatorsSi.na-s@, Jo- 15 no7 192011, Informatica Economica

7 $tt;997atsa-s7co#9ssays9Mac$ine+earnin.Tec$niKuesforStoc%)rediction7df

Ot$er *eferences

• GS +o.o; $tt;997.o-d#ansac$s7co#9

• IITM +o.o; $tt;99researc$orta-7iit#7ac7in9Kdon-oad

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