Category: Quantitative Finance

R is one of the best choices when it comes to quantitative finance. Here we will show you how to load financial data, plot charts and give you a step-by-step template to backtest trading strategies. So, read on…
Continue reading “Backtest Trading Strategies Like a Real Quant”

Asset returns have certain statistical properties, also called stylized facts. Important ones are:

• Absence of autocorrelation: basically the direction of the return of one day doesn’t tell you anything useful about the direction of the next day.
• Fat tails: returns are not normal, i.e. there are many more extreme events than there would be if returns were normal.
• Volatility clustering: basically financial markets exhibit high-volatility and low-volatility regimes.
• Leverage effect: high-volatility regimes tend to coincide with falling prices and vice versa.

Continue reading “Inverse Statistics – and how to create Gain-Loss Asymmetry plots in R”