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.

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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.

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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.

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Understanding the market's expectations of COVID-19

[ finance ]

One of the reasons why I find markets fascinating is that they are capable of integrating huge amounts of information, misinformation, hope, fear and uncertainty into a single number – the price of an asset. In this post, we work backwards, quantitatively examining what the current price of an asset can tell us about its future prospects.

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Rebuilding PyPortfolioOpt: an open source adventure

[ programming ]

A few weeks ago, a user raised an issue on the GitHub repository for PyPortfolioOpt, my open-source portfolio optimisation software library. In this nontechnical post, I discuss why a seemingly innocuous error resulted in a ground-up rebuild of a large chunk of PyPortfolioOpt, and share some reflections on open-source in general.

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Black-Litterman allocation in algorithmic trading

[ quant-finance ]

In December 2019, I released a major update to PyPortfolioOpt, my python portfolio optimisation package. The most significant addition was an implementation of the Black-Litterman (BL) method. Although BL optimisation is commonly used as part of a pipeline to optimise a multiasset/equity portfolio, in this post I argue that BL is particularly well suited to the problem of optimally weighting signals in an algorithmic trading context.

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An asymmetric bet on interest rates

[ finance ]

In this post, we discuss how asymmetric bets can be evaluated with the expected value. Following this, I argue that the market was overestimating the probability of a rate cut in July 2019 and examine how the inherent asymmetry of the situation can set the stage for a profitable macro bet.

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How predictive is the historical volatility?

[ quant-finance ]

One of the things that makes markets exciting (or frightening) is that prices move around a lot. It is important to be able to describe and predict the range of possible price movements over a given time horizon since some investors might desire assets whose prices don’t move up and down too much. We can quantify this by computing the volatility, which is commonly defined to be the standard deviation of the asset’s (log) returns. This post examines how well we can predict future volatility and why that matters.

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Implementing k-means clustering from scratch in C++

[ programming ]

In this post, I describe the k-means algorithm and provide a simple implementation in C++ along with a simple plotting routine in python.

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What we learnt building an enterprise-blockchain startup

[ blockchain ]

It has been almost a year since the idea of HyperVault was first conceived. In that time, we built HyperVault up from a single sentence, gained and lost team members along the way, developed a functional proof-of-concept over the short winter holidays, crashed out of a few competitions (also won a couple of prizes), and finally decided to open source. This post aims to be an honest reflection on the journey – highlighting both the good bits and the times we wanted to give up.

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