Nam Nguyen

Reducing Transaction Costs in Volatility-Managed Portfolios Volatility targeting is a risk and portfolio management technique that adjusts exposure based on changes in asset volatility.

Reducing Transaction Costs in Volatility-Managed Portfolios
#finance #trading #investing

Volatility targeting is a risk and portfolio management technique that adjusts exposure based on changes in asset volatility. We have discussed volatility targeting…

The Limits of Out-of-Sample Testing Revisiting Out-of-Sample Accuracy in Trading Models

The Limits of Out-of-Sample Testing
#finance #trading #investing

In trading system design, out-of-sample (OOS) testing is a critical step to assess robustness. It is a necessary step, but not sufficient. In this edition, I'll explore some issues with OO…

Market Ecology and the Role of Trading Strategy Diversity in Market Stability Market ecology refers to the complex interplay and dynamics among various participants, assets, and factors within financial markets.

Market Ecology and the Role of Trading Strategy Diversity in Market Stability
#finance #trading #investing

Market ecology refers to the complex interplay and dynamics among various participants, assets, and factors within financial markets. Just like in…

Predicting Realized Volatility Using Skewness and Kurtosis Realized volatility refers to the actual volatility experienced by a financial asset over a specific period, typically computed using historical price data.

Predicting Realized Volatility Using Skewness and Kurtosis
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Realized volatility refers to the actual volatility experienced by a financial asset over a specific period, typically computed using historical price data. By calcu…

Good business for the exchange and retail brokers like Robinhood

The Rise of 0DTE Options: Cause for Concern or Business as Usual? from @harbourfrontquant.substack.com #quant

Behavioral Biases and Retail Options Trading from @harbourfrontquant.substack.com #quant

Depends on the market, but old model is still useful

Sentiment as Signal: Forecasting with Alternative Data and Generative AI from @harbourfrontquant.substack.com #quant

Jumps and Volatility Clustering in AI-Driven Markets AI-assisted trading is a growing area in quantitative finance.

Jumps and Volatility Clustering in AI-Driven Markets
#finance #trading #investing

AI-assisted trading is a growing area in quantitative finance. However, concerns have emerged that it may destabilize markets. We recently discussed how trading strategies…

Lead-Lag Relationship Between Convertible Bonds and The Stock Markets A convertible bond is a type of security that can be converted into a predetermined number of shares of the issuer’s common stock at certain times during its life.

Lead-Lag Relationship Between Convertible Bonds and The Stock Markets
#finance #trading #investing

A convertible bond is a type of security that can be converted into a predetermined number of shares of the issuer’s common stock at certain times during …

Analyzing Crypto Market Sentiment with Natural Language Processing Sentiment analysis is a growing research area in quantitative finance, especially with the advancement of Large Language Models (LLMs) and Natural Language Processing (NLP).

Analyzing Crypto Market Sentiment with Natural Language Processing
#finance #trading #investing

Sentiment analysis is a growing research area in quantitative finance, especially with the advancement of Large Language Models (LLMs) and Natural Language P…

Is Pairs Trading Still Profitable? Pairs trading involves identifying two related securities, typically stocks, that have historically exhibited a strong correlation in price movements.

Is Pairs Trading Still Profitable?
#finance #trading #investing

Pairs trading involves identifying two related securities, typically stocks, that have historically exhibited a strong correlation in price movements. Traders then look for deviations from …

Sentiment as Signal: Forecasting with Alternative Data and Generative AI How to Use Alternative Data and LLMs to Generate Alpha

Sentiment as Signal: Forecasting with Alternative Data and Generative AI
#finance #trading #investing

Quantitative trading based on market sentiment is a less developed area compared to traditional approaches. With the explosion of social media, advance…

Volatility Spillover Between Developing Markets Volatility spillover refers to the transmission of volatility shocks from one market or asset to another, leading to increased volatility in the receiving market.

Volatility Spillover Between Developing Markets
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Volatility spillover refers to the transmission of volatility shocks from one market or asset to another, leading to increased volatility in the receiving market. These spillov…

Decomposing the Variance Risk Premium: Up and Down VRP The variance risk premium (VRP) is a well-researched topic in quantitative finance.

Decomposing the Variance Risk Premium: Up and Down VRP
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The variance risk premium (VRP) is a well-researched topic in quantitative finance. The VRP is the difference between the market-implied variance and the expected realiz…

An Options Pricing Model for Non-Frictionless Markets The traditional option pricing model assumes that the market is frictionless.

An Options Pricing Model for Non-Frictionless Markets
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The traditional option pricing model assumes that the market is frictionless. However, a body of research has developed theories that do not make this assumption. Referen…

Use of the Real-World Measure in Portfolio Management In the realm of finance, the risk-neutral measure takes precedence in pricing financial derivatives.

Use of the Real-World Measure in Portfolio Management
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In the realm of finance, the risk-neutral measure takes precedence in pricing financial derivatives. However, the real-world measure remains significantly valuable and i…

Can AI Trade? Modeling Investors with Large Language Models Large language models (LLMs) are advanced artificial intelligence systems trained on vast amounts of text data to understand and generate human-like language.

Can AI Trade? Modeling Investors with Large Language Models
#finance #trading #investing

Large language models (LLMs) are advanced artificial intelligence systems trained on vast amounts of text data to understand and generate human-like language. LLMs …

Credit Risk Models for Cryptocurrencies Credit risk is a fundamental aspect of financial risk management that arises from the possibility of borrowers or counterparties failing to meet their contractual obligations.

Credit Risk Models for Cryptocurrencies
#finance #trading #investing

Credit risk is a fundamental aspect of financial risk management that arises from the possibility of borrowers or counterparties failing to meet their contractual obligations. It refer…

Behavioral Biases and Retail Options Trading Key findings on retail investor behavior from recent market research

Behavioral Biases and Retail Options Trading
#finance #trading #investing

Behavioral finance is important, but it's not often discussed in quantitative trading. In this issue, I explore some aspects of behavioral finance.

Web-only posts Recap

Below is…

How to Deal with Missing Financial Data In the financial industry, data plays a critical role in enabling managers to make informed decisions and manage risk effectively.

How to Deal with Missing Financial Data
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In the financial industry, data plays a critical role in enabling managers to make informed decisions and manage risk effectively. Financial data can come from a wide range of sources…

The Friendship and Enmity Paradoxes The friendship paradox is a phenomenon in social network analysis that states that, on average, individuals tend to have fewer friends than their friends have.

The Friendship and Enmity Paradoxes
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The friendship paradox is a phenomenon in social network analysis that states that, on average, individuals tend to have fewer friends than their friends have. This paradox arises from th…

Improving Hedging with Skew-Adjusted Delta Delta hedging is a method used to reduce or eliminate the directional risk of an options position.

Improving Hedging with Skew-Adjusted Delta
#finance #trading #investing

Delta hedging is a method used to reduce or eliminate the directional risk of an options position. In most delta hedging schemes, delta is calculated using the Black-Scholes-Merton …

Incorporating Volume into Volatility Forecasting Volatility forecasting plays an important role in finance.

Incorporating Volume into Volatility Forecasting
#finance #trading #investing

Volatility forecasting plays an important role in finance. Its importance lies in the fact that it enables us to effectively price options and plan trading and hedging activi…

How Reliable Is Out-of-Sample Testing? Out-of-sample testing is a critical component of designing and evaluating trading systems.

How Reliable Is Out-of-Sample Testing?
#finance #trading #investing

Out-of-sample testing is a critical component of designing and evaluating trading systems. Trading systems are often developed and optimized using historical data, which can lead to ove…

Can ChatGPT Predict the Stock Market? ChatGPT is a large-scale language model developed by OpenAI.

Can ChatGPT Predict the Stock Market?
#finance #trading #investing

ChatGPT is a large-scale language model developed by OpenAI. It utilizes state-of-the-art deep learning techniques to generate human-like text responses based on the input it receives. T…

The Rise of 0DTE Options: Cause for Concern or Business as Usual? 0DTE Options Are Gaining Popularity—Do They Impact Market Stability?

The Rise of 0DTE Options: Cause for Concern or Business as Usual?
#finance #trading #investing

Zero DTE (Days to Expiration) options are contracts that expire on the same day they are traded. They were introduced in 2022 and have been gaining popularity…

Bitcoin Trend Following Strategies vs. Traditional Indices: A Comparative Study Trend following is an investment strategy that seeks to capture gains by identifying and trading in the direction of established market trends.

Bitcoin Trend Following Strategies vs. Traditional Indices: A Comparative Study
#finance #trading #investing

Trend following is an investment strategy that seeks to capture gains by identifying and trading in the direction of established market trends. …

Enhancing Market Timing Strategies Through the Use of Macroeconomic Indicators Market timing refers to the practice of attempting to predict future market movements in order to buy or sell securities at the most advantageous times.

Enhancing Market Timing Strategies Through the Use of Macroeconomic Indicators
#finance #trading #investing

Market timing refers to the practice of attempting to predict future market movements in order to buy or sell securities at the most advantageous…