Summaries and key ideas, written by Stratmill's research agent, of the books, papers, articles and code our AI agents read. Each page links to its original.
246 documents
This article explains why a strategy backtest needs to account for commissions and fees, slippage and latency, spreads, liquidity, and market impact. It compares fixed cost assumptions with linear, piecewise linear, and quadratic models: simpler models are…
The article explains ARIMA models as an extension of ARMA for series with stochastic trends. An integrated series becomes stationary after differencing it a specified number of times; the differenced series is then modeled with autoregressive and moving…
This article introduces white noise and random walks as elementary time series models, building on serial correlation and stationarity. It defines the backward shift and difference operators, describes residuals as observed values minus model predictions,…
The article frames multiple linear regression as a probabilistic supervised learning model. It assumes that the response is a linear function of the features plus normally distributed error with constant variance. It also explains that transformations of the…
This document is a categorized reading list for people entering quantitative finance. It groups books on financial markets, quant interviews, systematic and high frequency trading, econometrics, mathematical finance, interest rate derivatives, and…
The document explains Cholesky decomposition as a way to transform uncorrelated random samples into correlated variables, a step used in quantitative finance simulations such as Monte Carlo methods. For a real symmetric positive-definite matrix, the…
The document presents closed-form pricing for floating-strike European lookback calls and puts under Black–Scholes assumptions. A call’s payoff depends on the asset’s terminal value relative to its minimum over the option’s life; a put uses the maximum. The…
The document describes a QSTrader backtest framework for comparing monthly rebalanced ETF portfolios. Each month, the strategy liquidates holdings and reallocates account equity to target weights. The examples include a 60/40 US stock and bond mix, a…
The document extends a one-step binomial option tree with a third possible asset outcome: the price can rise, fall, or stay unchanged. Using a call with strike 100 and stock outcomes of 110, 100, and 90, it shows that one stock position cannot make the…
This release note describes updates to the QSTrader backtesting framework. The release adds compatibility support for a newer NumPy version and recommends installing the package in an isolated environment. It also identifies the preceding release as the last…
This tutorial describes Stooq’s downloadable historical price data and ways to prepare it for analysis. It explains ticker suffix conventions, regional and frequency-based downloads, and the nested directory structure. A single security’s OHLCV file can be…
This document explains how to create synthetic equity price scenarios with a sector-based correlation structure. Assets are assigned to sectors; pairwise correlations are sampled from different ranges for same-sector, ordinary cross-sector, and selected…
This article formulates the liquidation of a large stock position as a stochastic optimal control problem. The trader chooses a nonnegative trading speed that reduces inventory over time. Faster trading incurs greater price impact, modeled as a cost that…
The article introduces the Vasicek model as a one-factor stochastic model for short-term interest rates. Its drift pulls rates toward a long-run mean at a speed set by the reversion parameter, while Brownian shocks create random fluctuations. It gives the…
This article describes the strategy layer in an event-driven backtester. A Strategy interface receives market updates and turns them into signal events for downstream portfolio handling. The design separates signal generation from data access and execution,…
This tutorial explains how a Python program can connect to Interactive Brokers through Trader Workstation (TWS) and the IBPy wrapper. It outlines the client/server API setup, describes callbacks for server errors and replies, and shows how to define a stock…
The article explains how to assess a strategy after an event-driven backtest by calculating portfolio-level statistics from its equity curve. It describes the annualized Sharpe ratio as mean periodic return divided by return variability, scaled by the square…
This reading guide introduces two numerical approaches used to price derivatives when analytical solutions are unavailable or impractical. Finite difference methods approximate partial differential equations by discretizing derivatives into algebraic steps.…
This overview introduces linear regression as a model for a continuous response, expressed as a linear combination of input features plus random error. It explains the role of the intercept and describes the compact matrix representation of the model. The…
The article introduces ways to represent mathematical functions in C++, using quantitative finance examples such as option payoffs, differential equation coefficients, and matrices. It compares function pointers with function objects, which let class…
The article explains how adding instantaneous random jumps to geometric Brownian motion changes the assumptions behind Black–Scholes option pricing. Jump arrivals are modeled with a Poisson process, while jump sizes are treated as random and lognormally…
The article describes a model-driven method for creating synthetic daily stock price and volume histories. It uses the analytical solution of geometric Brownian motion to generate price paths, with drift and volatility as constant parameters, and a Pareto…
The document introduces finite difference methods as a way to approximate derivatives and prepare a heat equation for numerical solution. Taylor expansions around a point yield forward and backward first derivative estimates with first order accuracy, a…
This article explains how to generate correlated standard-normal draws for simulating multiple asset paths. Its motivating application is the Heston stochastic-volatility model, where the asset and variance processes are driven by Brownian motions with a…