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.
4,613 documents
The document considers position sizing for a hypothetical signal that predicts an index’s direction with a 60% win probability against 40% losses. One answer applies the Kelly criterion to maximize long-run capital growth and gives a fraction of capital to…
The document raises a portfolio optimization issue: a turnover constraint with a target of zero appears not to preserve user-specified starting weights. In the example, the author sets four initial asset weights, applies box and return and risk objectives,…
The document explains how a bond portfolio’s DV01 changes when the number of identical bonds increases. DV01 measures the dollar price change associated with a one basis point yield move, so the portfolio’s DV01 is the per-bond amount multiplied by the…
The document examines a proposed position-sizing rule that scales exposure using portfolio capital, a target volatility, instrument volatility and price, and a portfolio-level multiplier. That multiplier is based on the ratio of target volatility to lagged…
The document frames option selection as a finite search over quoted calls: given a target stock price at expiration, calculate each contract’s profit relative to its premium and select the strike with the highest percentage return. For a discrete set of…
The discussion considers whether cryptography and speech recognition methods inform financial forecasting, with the accepted answer reframing cryptography as information theory. It connects Kelly-style allocation to sizing capital across strategies and notes…
The document considers a one-sided strategy that repeatedly places buy and sell orders at price levels determined by step counts in a geometric random walk. The question asks how to choose those levels to maximize expected profit over a fixed horizon, but…
The document discusses coordinating two high-frequency agents that trade opposite sides of a market while managing inventory and exposure limits. It frames market making as a control problem in which quotes must balance expected execution quality against the…
The document checks a continuous-time Kelly criterion derivation for a portfolio split between a risky asset and a risk-free asset. The key correction to the proposed wealth process is that the Brownian shock must be scaled by the risky allocation as well as…
The discussion considers how to judge algorithm performance when strategies have different returns and Sharpe ratios across instruments. It argues that Sharpe alone is incomplete: it relates excess return to total return variability, but a high value can be…
The document considers whether a risk-aversion parameter can be inferred from a target value at risk under a continuous-time portfolio model. The risky-asset allocation follows the Merton rule, linking weight to expected return, the risk-free rate,…
The discussion clarifies the meaning of the drift vector in the unconstrained Kelly portfolio formula, where allocations depend on the inverse return covariance matrix and excess drift over the risk-free rate. The answer says the objective is long-run…
The document asks how to calculate cumulative percentage performance for a strategy whose long and short notionals, and thus net exposure, change frequently. It defines daily return as daily dollar PnL divided by that day’s net exposure, using a long-short…
The responses distinguish parameters estimated from data from hyperparameters chosen to configure a model. A parametric example assumes that two variables follow a specified probability distribution and estimates its means and covariance from observed…
The document poses a risk management question: how to choose a withdrawal fraction and a profit threshold for taking money out of a trading account while balancing ruin risk against compounding. It gives an illustrative proposal based on withdrawing part of…
The document asks whether splitting a fixed, unlevered, long-only investment across up to a limited number of entry dates can improve expected payoff by lowering the weighted average purchase price. Its accepted answer models each period’s return as an…
The document addresses how to place several orders when a trading target is expressed as a price interval rather than a single price. Its proposed approach first sets the number of orders according to the capital allocated to the decision and the minimum…
The document compares two R backtesting options: Quantstrat, which works with related portfolio and financial-instrument packages, and the Systematic Investor Toolbox (SIT). It does not provide a formal benchmark; instead, it collects user impressions about…
The document gives an approximate way to relate SPY price movements to E-mini S&P 500 futures exposure. It states that the cash index level is about ten times the SPY price, while each futures contract gains or loses a fixed dollar amount for each index…
The discussion addresses how to approach trading on betting exchanges, including sport selection, research effort, bankroll, and exchange fees. Its main strategic point is that high liquidity can make prices more efficient: odds may adjust quickly to reflect…
The document raises a portfolio-allocation problem for an algorithmic trader running several stock-market models that may generate signals at the same time. With a finite wallet, committing all capital to one model can prevent acting on another signal and…
The document considers how to express a long Mexican peso versus Japanese yen position using separate currency futures. It compares the dollar-equivalent notionals of two yen contracts and one peso contract, then asks whether the proposed direction is to…
This discussion examines a simulation inspired by Mark Spitznagel’s account of traders choosing between strategies with different payoff shapes. One strategy offers frequent small gains and rare large losses; the other offers frequent small losses and rare…
This note derives the market decline that would reduce a leveraged stock portfolio to its maintenance margin threshold. It defines cash or borrowing, the market value of long positions, and the maintenance margin fraction, then sets portfolio equity equal to…