How I use Notion

[ productivity ]

This post is a fairly comprehensive discussion of how I use Notion (a free personal knowledge management app) to organise various aspects of my life: project management, reading, academics, plans/goals, investing, and more. The post is not designed to be read linearly – pick and choose the bits that are relevant to you.

Read more...

Hypothesis testing in quant finance

[ quant-finance ]

At its core, science is about making falsifiable hypotheses about the world (Popper), testing them experimentally, then using the experiment outcomes to refute or refine the hypotheses. The scientific method is an integral part of quantitative finance; it provides a framework we can use to identify and analyse trading signals or anomalies. In this short post, we discuss a general method for hypothesis-testing in finance, using Monte Carlo simulations to compute the probability that an observed signal can be explained by random chance.

Read more...

COVID-19 Beta

[ quant-finance ]

In this short post, we compute and visualise “COVID-19 betas” for stocks in the S&P500 index, to quantitatively and visually understand which companies were most affected (positively and negatively) by COVID-19.

Read more...

Option-implied probability distributions, part 2

[ finance ]

In Part 1 of this series, we demonstrated that the prices of option butterfly spreads imply a probability distribution of prices for the underlying asset. In this post, we will first examine the limiting case of butterfly spreads. Then, we will tackle the industry-standard approach for constructing PDFs from option prices: interpolating in volatility space to generate a volatility surface, converting this into a continuous set of option prices, then applying the Breeden-Litzenberger formula to find the PDF.

Read more...

Option-implied probability distributions, part 1

[ finance ]

The goal of this two-part series is to understand what option prices can tell us about the implied probability distribution of future asset prices. Part 1 lays the groundwork and examines an intuitive approach using butterfly spreads.

Read more...

Equity Investing Checklist

[ finance ]

This page represents a work-in-progress checklist for equity investing. It is continuously being refined based on my reading, as well as my actual experience in researching and investing. The hope is that this provides transparency and accountability (for myself), to better understand my cognitive biases and weak spots.

Read more...

A critical look at Greenblatt's Magic Formula

[ quant-finance ]

As the saying goes, when something sounds too good to be true, it probably is – all the more so when it comes to investing. In this short post, we look at the Magic Formula of Joel Greenblatt, as described in The Little Book That Still Beats the Market, critically examining the strategy and attempting to quantify its alpha.

Read more...

The Big Shorts: what is the smart money betting against?

[ finance ]

Hedge funds in the UK are legally obligated to disclose to the Financial Conduct Authority (FCA) whenever their net short position in a particular listed company reaches 0.5% of the issued equity capital. In this post, I investigate a publicly available dataset containing information about these large institutional short positions in UK equities and attempt to understand the value that this data contains.

Read more...

Statistical arbitrage in closed-end funds

[ quant-finance ]

Sometimes, it is cheaper to buy a basket of assets than it is to buy the assets in the basket. In this post, we discuss closed-end funds and why they often trade at a discount to their net asset value. Furthermore, we explore whether this could be the basis for an algorithmic trading strategy.

Read more...

A Tanker Trade

[ finance ]

April 2020 has been a volatile month for oil. Last week, the May WTI contract traded at a low of minus \$40 a barrel. In a desperate search for storage space, people have been chartering oil tankers to use as floating storage units, leading to a price surge in shares of tanker companies like Nordic American Tanker (46%), Teekay (30%), and Scorpio Tankers (59%). In this post, we aim to build a framework for forecasting the revenue of DHT Holdings (NYSE:DHT), a tanker company.

Read more...