Time series (cont.)
random walk process, 22–24
white noise, 16–17
types of, 14
deterministic, 14
probabilistic, 14
stochastic, 14
Tracking baskets, 81
design, 49–50
Tracking error, 49, 81
Tradability, testing for, 104–117
linear relationship, 106–107
multifactor approach for
estimating, 107–108
regression approach for
estimating, 108–112
testing residual for tradability,
112–118
Trade execution, 151–167
broker, 151
execution during pricing period,
161–166
bounds on position size, 163–165
short sale, 151–152
short selling, 166–167
specifying the order, 152–155
action, 153
bidder and target tickers, 153
ratio and cash amount, 153
short sale indicator, 154
spread value, 153
target stock quantity, 154
verifying the execution, 155–160
Trading design, 118–136
ARMA model, 124–125
band design for white noise,
118–122
hidden Markov ARMA models,
125–126
mixture Gaussian distribution,
123–124multiple threshold design, 135–136
nonparametric approach, 126–130
regularization, 130–135
Tikhonov-Mille, 132
Sharpe ratio calculations, 136
spread dynamics, 118, 122–128
time-based stops, 136
Trading strategy, 82–83, 147–149V
Value at risk (VAR), 172
measurement, 184–185
Variance, 12
Vectors, 95–96
Venetor Group, 181
Volatility, 5, 44, 64, 102, 108,
123–124, 172
historic, 64
implied, 166, 172
realized, 192–193
Volume weighted average price
(VWAP) price, 112W
Walk away right, 145
Watson, Mark W., 77, 79, 104
Weighted least squares, 111
Weiner, Nobert, 14
Weiner filtering, 14, 22, 189
White noise, 16–17, 121
band design for, 118–122
Gaussian series, 120
Wilshire Atlas model, 38
Wyser-Pratt, Eugene, 141Z
Zero beta portfolio, 5–6
Zero crossing, 24, 112–114
rate, 113–114
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