One of the fundamental shortcoming of the popular analysis tools for time series is that they require the data to be taken at uniform time intervals. However, the real-world time series, such as those from financial markets, are mostly from irregular time intervals. It is a common practice to...

* It has been estimated that the current size of the asset management industry is approximately US$58 trillion.* Portfolio optimization is one of the problems most frequently encountered by financial practitioners. It appears in various forms in the context of Trading, Risk Management and...

Multiple empirical studies have shown that Order Flow Imbalance has predictive power over the trading range.The PIN Theory (Easley et al. [1996]) reveals the Microstructure mechanism by which: Market Makers adjust their trading range to avoid being adversely selected by Informed Traders;...

SEC and CFTC reports estimate that High Frequency strategies are responsible for about 60% of all transactions on U.S. shares. In Europe, this percentage is around 40% and growing. High Frequency strategies are those characterized by a brief holding period, which can range from a split second to...

In this presentation, we analyze the explanatory (in-sample) and predictive (out-of-sample) importance of some of the best known market microstructural features. Our conclusions are drawn over the entire universe of the 87 most liquid futures worldwide, covering all asset classes, going back...

A basket is a set of instruments that are held together because its statistical profile delivers a desired goal, such as hedging or trading, which cannot be achieved through the individual constituents or even subsets of them. Multiple procedures have been proposed to compute hedging and trading...

Recently Andersen and Bondarenko posted a paper on SSRN with the title “VPIN and the Flash Crash” which is essentially a comment on our earlier work on the measure of order toxicity, VPIN. Andersen and Bondarenko dispute our empirical findings and argue that VPIN essentially doesn't work. We...

Because the Sharpe ratio only takes into account the first two moments, it wrongly “translates” skewness and excess kurtosis into standard deviation.As a result: It deflates the skill measured on “well-behaved” investments (positive skewness, negative excess kurtosis). It inflates the...

Multiple empirical studies have shown that Order Flow Imbalance has predictive power over the trading range.The PIN Theory (Easley et al. [1996]) reveals the Microstructure mechanism by which:– Market Makers adjust their trading range to avoid being adversely selected by Informed Traders.–...

Every structure has natural frequencies. Minor shocks in these frequencies can bring down any structure, e.g. a bridge. An Investment Universe also has natural frequencies, characterized by its eigenvectors. A concentration of risks in the direction of any such eigenvector exposes a portfolio to...