Publications by Ilya Kipnis
Nuts and Bolts of Quantstrat, Part IV
This post will provide an introduction to the way that rules work in quantstrat. It will detail market orders along with order-sizing functions (limit orders will be saved for a later date). After this post, readers should be able to understand the strategies written in my blog posts, and should be able to write their own. Unlike indicators and s...
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Structural Arb Analysis and Portfolio Management Functionality in R
I want to use this post to replicate an article I found on SeekingAlpha, along with demonstrating PerformanceAnalytics’s ability to do on-the-fly portfolio rebalancing, without having to rewrite return-tracking functionality yourself. Recently, I read an article written by Harry Long about an ETF trading strategy that went long the XIV for 40%...
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A Failed Attempt at Backtesting Structural Arbitrage
One of the things that I wondered about regarding the previous post was how would this strategy have performed in the past, before the inception of XIV? My first go-around involved me backtesting on the actual VIX index. Unfortunately, there is no instrument that actually perfectly tracks the VIX (EG ala SPY vs. the S&P 500 index). So, one common...
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Structural “Arbitrage”: a Working Long-History Backtest
For this post, I would like to give my sincere thanks to Mr. Helmuth Vollmeier, for providing the long history daily data of XIV. It is tremendously helpful. Also, I put arbitrage in quotations now, for reasons we’ll see in this post. To begin, here’s a script I wrote to create this backtest. require(downloader) download("https://dl.dropboxus...
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Structural “Arbitrage”: Trading the Equity Curve
The last post demonstrated that far from being a world-beating, absolutely amazing strategy, that Harry Long’s Structural “Arbitrage”, was in fact a very risky strategy whose drawdowns were comparable to that of the S&P 500 itself during the financial crisis. Although the annualized returns were fairly solid, the drawdowns themselves were i...
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An Attempt At Replicating Flexible Asset Allocation (FAA)
Since the people at Alpha Architect were so kind as to feature my blog in a post, I figured I’d investigate an idea that I first found out about from their site–namely, flexible asset allocation. Here’s the SSRN, and the corresponding Alpha Architect post. Here’s the script I used for this replication, which is completely self-contained. ...
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Introducing Stepwise Correlation Rank
So in the last post, I attempted to replicate the Flexible Asset Allocation paper. I’d like to offer a thanks to Pat of Intelligent Trading Tech (not updated recently, hopefully this will change) for helping me corroborate the results, so that I have more confidence there isn’t an error in my code. One of the procedures the authors of the FAA...
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A Walk-Forward Attempt on FAA
So in the first post about FAA, I was requested to make a walk-forward test of FAA. While the results here aren’t good, I’d like to share the general process anyway. Here’s the additional code I wrote, assuming the first post‘s code is still in your environment (the demo will have the function in the namespace as well): weightMom <- seq(0...
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Combining FAA and Stepwise Correlation
Since I debuted the stepwise correlation algorithm, I suppose the punchline that people want to see is: does it actually work? The short answer? Yes, it does. A slightly longer answer: it works, With the caveat that having a better correlation algorithm that makes up 25% of the total sum of weighted ranks only has a marginal (but nevertheless p...
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It’s Amazing How Well Dumb Things [Get Marketed]
Recently, Harry Long posted not one but four new articles on Seeking Alpha called It’s Amazing How Well Dumb Things Work II. The last time I replicated a strategy by Mr. Long, it came up short on the expectations it initially built. For the record, here are the links to the four part series. First post Second post (very valuable comments secti...
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