|
Pairs Trade
A pairs trade or pair trading is a market neutral trading strategy enabling traders to profit from virtually any market conditions: uptrend, downtrend, or sideways movement. This strategy is categorized as a statistical arbitrage and convergence trading strategy. Pair trading was pioneered by Gerry Bamberger and later led by Nunzio Tartaglia's quantitative group at Morgan Stanley in the 1980s. The strategy monitors performance of two historically correlated securities. When the correlation between the two securities temporarily weakens, i.e. one stock moves up while the other moves down, the pairs trade would be to short the outperforming stock and to long the underperforming one, betting that the "spread" between the two would eventually converge. The divergence within a pair can be caused by temporary supply/demand changes, large buy/sell orders for one security, reaction for important news about one of the companies, and so on. Pairs trading strategy demands good position s ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Pair Tool
Pair or PAIR or Pairing may refer to: Government and politics * Pair (parliamentary convention), matching of members unable to attend, so as not to change the voting margin * ''Pair'', a member of the Prussian House of Lords * ''Pair'', the French equivalent of peer, holder of a French Pairie, a French high title roughly equivalent to a member of the British peerage Mathematics * 2 (number), two of something, a pair * Unordered pair, or pair set, in mathematics and set theory * Ordered pair, or 2-tuple, in mathematics and set theory * Pairing, in mathematics, an R-bilinear map of modules, where R is the underlying ring * Pair type, in programming languages and type theory, a product type with two component types * Topological pair, an inclusion of topological spaces Science and technology * Couple (app), formerly Pair, a mobile application for two people * PAIR (puncture-aspiration-injection-reaspiration), in medicine * Pairing, a handshaking process in Bluetooth communications * ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Wilmott (magazine)
''Wilmott Magazine'' is a mathematical finance and risk management magazine, combining technical articles with humor pieces. Each copy of ''Wilmott'' is 11 inches square, runs about 100 pages, and is printed on glossy paper. The magazine has the highest subscription price of any magazine. ''Esquire''. 16 July 2007. Retrieved 4 March 2017. Content and contributors ''Wilmott'' has a section with technical articles on , but includes quantitative financial comic strips, and lighter articles. ''Wilmott'' magazine's regular contributors include[...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Johansen Test
In statistics, the Johansen test, named after Søren Johansen, is a procedure for testing cointegration of several, say ''k'', Order of integration, I(1) time series. This test permits more than one cointegrating relationship so is more generally applicable than the Cointegration#Engle–Granger_two-step_method, Engle-Granger test which is based on the Dickey–Fuller test, Dickey–Fuller (or the Augmented Dickey–Fuller test, augmented) test for unit roots in the residuals from a single (estimated) cointegrating relationship. Types There are two types of Johansen test, either with Trace (linear algebra), trace or with eigenvalue, and the inferences might be a little bit different. The null hypothesis for the trace test is that the number of cointegration vectors is ''r'' = ''r''* < ''k'', vs. the alternative that ''r'' = ''k''. Testing proceeds sequentially for ''r''* = 1,2, etc. and the first non-rejection of the null is taken as an esti ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Convergence Trade
Convergence trade is a trading strategy consisting of two positions: buying one asset forward—i.e., for delivery in future (going ''long'' the asset)—and selling a similar asset forward (going '' short'' the asset) for a higher price, in the expectation that by the time the assets must be delivered, the prices will have become closer to equal (will have converged), and thus one profits by the amount of convergence. Convergence trades are often referred to as arbitrage, though in careful use arbitrage only refers to trading in ''the same'' or ''identical'' assets or cash flows, rather than in ''similar'' assets. Examples On the run/off the run On-the-run bonds (the most recently issued) generally trade at a premium over otherwise similar bonds, because they are more liquid—there is a liquidity premium. Once a newer bond is issued, this liquidity premium will generally decrease or disappear. For example, the 30-year US treasury bond generally trades at a premium relati ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Systematic Risk
In finance and economics, systematic risk (in economics often called aggregate risk or undiversifiable risk) is vulnerability to events which affect aggregate outcomes such as broad market returns, total economy-wide resource holdings, or aggregate income. In many contexts, events like earthquakes, epidemics and major weather catastrophes pose aggregate risks that affect not only the distribution but also the total amount of resources. That is why it is also known as contingent risk, unplanned risk or risk events. If every possible outcome of a stochastic economic process is characterized by the same aggregate result (but potentially different distributional outcomes), the process then has no aggregate risk. Properties Systematic or aggregate risk arises from market structure or dynamics which produce shocks or uncertainty faced by all agents in the market; such shocks could arise from government policy, international economic forces, or acts of nature. In contrast, specific ris ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Beta Coefficient
In finance, the beta ( or market beta or beta coefficient) is a statistic that measures the expected increase or decrease of an individual stock price in proportion to movements of the stock market as a whole. Beta can be used to indicate the contribution of an individual asset to the market risk of a portfolio when it is added in small quantity. It refers to an asset's non-diversifiable risk, systematic risk, or market risk. Beta is not a measure of idiosyncratic risk. Beta is the hedge ratio of an investment with respect to the stock market. For example, to hedge out the market-risk of a stock with a market beta of 2.0, an investor would short $2,000 in the stock market for every $1,000 invested in the stock. Thus insured, movements of the overall stock market no longer influence the combined position on average. Beta measures the contribution of an individual investment to the risk of the market portfolio that was not reduced by diversification. It does not measure the r ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Capital Asset Pricing Model
In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a Diversification (finance), well-diversified Portfolio (finance), portfolio. The model takes into account the asset's sensitivity to non-diversifiable risk (also known as systematic risk or market risk), often represented by the quantity Beta (finance), beta (β) in the financial industry, as well as the expected return of the market and the expected return of a theoretical Risk-free bond, risk-free asset. CAPM assumes a particular form of utility functions (in which only first and second Moment (mathematics), moments matter, that is risk is measured by variance, for example a quadratic utility) or alternatively asset returns whose probability distributions are completely described by the first two moments (for example, the normal distribution) and zero transaction costs (necessary for diversifi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Mean Reversion (finance)
Mean reversion is a financial term for the assumption that an asset's price will tend to converge to the average price over time. Using mean reversion as a timing strategy involves both the identification of the trading range for a security and the computation of the average price using quantitative methods. Mean reversion is a phenomenon that can be exhibited in a host of financial time-series data, from price data, earnings data, and book value. When the current market price is less than the average past price, the security is considered attractive for purchase, with the expectation that the price will rise. When the current market price is above the average past price, the market price is expected to fall. In other words, deviations from the average price are expected to revert to the average. This expectation serves as the cornerstone of multiple trading strategies. Stock reporting services commonly offer moving averages for periods such as 50 and 100 days. While reporting s ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Long (finance)
In finance, a long position in a financial instrument means the holder of the position owns a positive amount of the instrument. The holder of the position has the expectation that the financial instrument will increase in value. This is known as a bullish position. The term "long position" is often used in context of buying options contracts. Ownership When an investor holds a long position in a stock they are buying a share of ownership in a company. Depending on the type of Stock purchased this can entitle the shareholder to voting rights at shareholder meetings or dividend payments. Security In terms of a security, such as a stock or a bond, or equivalently ''to be long'' in a security, means the holder of the position owns the security, on the expectation that the security will increase in value, and will profit if the price of the security goes up. ''Going long'' a security is the more conventional practice of investing. Future Going long in a future means th ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Short (finance)
In finance, being short in an asset means investing in such a way that the investor will profit if the market value of the asset falls. This is the opposite of the more common Long (finance), long Position (finance), position, where the investor will profit if the market value of the asset rises. An investor that sells an asset short is, as to that asset, a short seller. There are a number of ways of achieving a short position. The most basic is physical selling short or short-selling, by which the short seller Securities lending, borrows an asset (often a security (finance), security such as a share (finance), share of stock or a bond (finance), bond) and sells it. The short seller must later buy the same amount of the asset to return it to the lender. If the market price of the asset has fallen in the meantime, the short seller will have made a profit equal to the difference in price. Conversely, if the price has risen then the short seller will bear a loss. The short seller ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Execution Management System
An Execution management system, or EMS, is an application utilized by traders designed to display market data and provide seamless and fast access to trading destinations for the purpose of transacting orders. This application contains broker provided and independent algorithms such as TWAP and VWAP, global market data and technology that is able to help predict certain market conditions.Daniel SafarikExecution Management Systems: From the Street and on the Block ''financetech.com'', September, 2006 One of the important features of EMS is the capacity to manage orders across multiple trading destinations such as stock exchanges, stock brokerage firms, crossing networks and electronic communication networks. In addition to commercial vendors, a few open-source projects can be counted in as EMS, although their breadth varies. See also *Algorithmic trading *Dark liquidity *Electronic trading platform *High-frequency trading *Order management system *Single-dealer platform A single ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Algorithmic Trading
Algorithmic trading is a method of executing orders using automated pre-programmed trading instructions accounting for variables such as time, price, and volume. This type of trading attempts to leverage the speed and computational resources of computers relative to human traders. In the twenty-first century, algorithmic trading has been gaining traction with both retail and institutional traders. A study in 2019 showed that around 92% of trading in the Forex market was performed by trading algorithms rather than humans. It is widely used by investment banks, pension funds, mutual funds, and hedge funds that may need to spread out the execution of a larger order or perform trades too fast for human traders to react to. However, it is also available to private traders using simple retail tools. The term algorithmic trading is often used synonymously with automated trading system. These encompass a variety of trading strategies, some of which are based on formulas and results ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
