Publications by Pete
A quick look at FX realized vol
Much has been said about the decline in volatility. At the moment I am very active in FX spot trading and as a generalization do better the more vol there is. I wanted to see how things stood on the crosses I am most active in, namely EUR/USD, GBP/USD and USD/JPY. I took hourly data from FxPro (not my broker, nor an endorsement), ca...
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Trading in a low vol world
I wanted to take a look at what works in low vol environments, such as we are currently experiencing. I am open to the idea we have entered a period of structurally low volatility due to increased regulatory burden and flow on effects from the decline of institutional FICC trading. Or it may just be a function of QE, and post-taperin...
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Bayesian Naive Bayes for Classification with the Dirichlet Distribution
I have a classification task and was reading up on various approaches. In the specific case where all inputs are categorical, one can use “Bayesian Naïve Bayes” using the Dirichlet distribution. Poking through the freely available text by Barber, I found a rather detailed discussion in chapters 9 and 10, as well as example matlab code f...
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Does Trend Following Work?
I’m not sure how I came across it, but I have had Jez Liberty’s Au.Tra.Sy blog in my reader since around 2009. Since then, he has tracked well-known trend following systems and reported monthly performance figures. These are things like moving average crossovers, Bollinger band breakouts and stuff like that.The systems had a very good month ...
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Fitting a mixture of independent Poisson distributions
This is an example from Zucchini & MacDonald’s book on Hidden Markov Models for Time Series (exercise 1.3). The data is annual counts of earthquakes of magnitude 7 or greater, which exhibits both overdispersion for a Poisson (where the mean should equal the variance) as well as serial dependence. The aim is to fit a mixture of m independent P...
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The R documentation is bad
I have been using R for some time now and still can find it frustrating to work with. Over the years have come to the conclusion that it is primarily due to the documentation being bad. I offer no actual solutions here, but thought I would try and write down exactly what I dislike about it.The docs are more or less premised on knowing...
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Adopting R for experienced developers
More and more frequently I come across people who express an interest in R, and I thought I would share some advice to help people decide if R is something they should use, as well as some high level advice on getting started. Most of these people are developers with at least few years experience writing code for a living, and this advice is dire...
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Simulation and relative performance
There’s been some nice posts on randomness the last week or so, in particular here and here. I would like to look at how we can use simulations to get a better understanding of how some aspect of a trading system holds up relative to a bunch of random trades.In this example, I look at entries on weekly data for SPY. The entry signal is to bu...
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