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Arbitrage Quantitative Trading Workshop

Quantitative trading utilizes mathematical analysis and computational techniques to identify market opportunities through real-time data analysis. Traders collect and preprocess various data types, develop strategies based on models like statistical arbitrage and machine learning, and backtest these strategies to evaluate their performance. Key users include hedge funds, proprietary trading firms, and retail traders, while challenges include overfitting, market regime changes, and latency issues.

Uploaded by

Vinay Gaikwad
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10 views

Arbitrage Quantitative Trading Workshop

Quantitative trading utilizes mathematical analysis and computational techniques to identify market opportunities through real-time data analysis. Traders collect and preprocess various data types, develop strategies based on models like statistical arbitrage and machine learning, and backtest these strategies to evaluate their performance. Key users include hedge funds, proprietary trading firms, and retail traders, while challenges include overfitting, market regime changes, and latency issues.

Uploaded by

Vinay Gaikwad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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QUANTITATIVE

TRADING

Let’s Solve The Market!


01

Quantitative trading relies on mathematical


WHAT IS analysis and computational techniques to
identify opportunities.

QUANTITATIVE Quants use statistics and programming to


analyze market data in real time, enabling
TRADING data-driven decisions and rapid adaptation.
03
Quant traders gather large amounts of
financial data, including:
HOW IT WORKS?
Market Data: Price, volume, order book
depth.
1. DATA COLLECTION &
PREPROCESSING: Fundamental Data: Earnings reports,
balance sheets.

Alternative Data: Satellite images, social


media sentiment, news, etc.

The data is cleaned, normalized, and


transformed into a usable format.
Quant traders design trading strategies based
04 on different models:

Statistical Arbitrage: Identifying mispriced


HOW IT WORKS? assets using statistical methods.

Mean Reversion: Assuming prices revert to


their historical mean.
2. STRATEGY DEVELOPMENT
Momentum Trading: Following trends based
on past price movements.

Machine Learning Models: Using AI to


predict price movements.

High-Frequency Trading (HFT): Executing


trades at extremely high speeds to profit
from small price discrepancies.
05
Strategies are tested on historical
data to evaluate performance.
HOW IT WORKS?
Risk metrics such as Sharpe ratio,
maximum drawdown, and
3. BACKTESTING
profitability are analyzed.

If a strategy performs well in


backtesting, it moves to live
testing.
06
Hedge Funds (e.g., Renaissance
Technologies, Citadel, Two Sigma)
WHO USES?
Proprietary Trading Firms (e.g., Jane Street,
QUANTITATIVE Jump Trading)

TRADING Investment Banks (e.g., Goldman Sachs,


Morgan Stanley)

Retail Traders using Python, algorithmic


trading APIs, and cloud computing.
07

CHALLENGES ⚠ Overfitting: A strategy may perform well in


backtests but fail in live markets.

& RISKS! ⚠ Market Regime Changes: Models may break


in volatile conditions.

⚠ Latency Issues: Millisecond delays can


impact high-frequency trading.

⚠ Black Swan Events: Unpredictable market


crashes can cause large losses.
08
09

NOISE IN
THE DATA!!
A moving average is a technical indicator that
market analysts and investors may use to
10 determine the direction of a trend.

It sums up the data points of a financial security


over a specific time period and divides the total
by the number of data points to arrive at an
MOVING average.

AVERAGE
11

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