Publications by Ilya Kipnis
Seeking Volatility and Leverage
So Harry Long recently posted several articles, a couple of them all that have variations on a theme of a combination of leveraging SPY (aka SPXL), leveraging TLT (aka TMF), and some small exposure to the insanely volatile volatility indices (VXX, TVIX, ZIV, etc.), which can have absolutely insane drawdowns. Again, before anything else, a special...
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Predicting High Yield with SPY–a Two Part Post
This post will cover ideas from two individuals: David Varadi of CSS Analytics with whom I am currently collaborating on some volatility trading strategies (the extent of which I hope will end up as a workable trading strategy–my current replica of some of VolatilityMadeSimple’s publicly displayed “example” strategies (note, from other ...
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Volatility Risk Premium: Sharpe 2+, Return to Drawdown 3+
First, before starting this post, I’d like to give one last comment about my previous post: I called Vanguard to inquire about the trading policies on VWEHX and VFISX, and there are two-month cooldown periods (aka frequent-trading policies) on those mutual funds. However, the HYG ETF does indeed pay dividends, so the adjusted ETF variant is mos...
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Trading The Odds Volatility Risk Premium: Addressing Data Mining and Curve-Fitting
Several readers, upon seeing the risk and return ratio along with other statistics in the previous post stated that the result may have been the result of data mining/over-optimization/curve-fitting/overfitting, or otherwise bad practice of creating an amazing equity curve whose performance will decay out of sample. Fortunately, there’s a way t...
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An Update on Flexible Asset Allocation
A few weeks back, after seeing my replication, one of the original authors of the Flexible Asset Allocation paper got in touch with me to tell me to make a slight adjustment to the code, in that rather than remove any negative-momentum securities before performing any ranking, to perform all ranking without taking absolute momentum into account, ...
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A New Volatility Strategy, And A Heuristic For Analyzing Robustness
This post is motivated by a discussion that arose when I tested a strategy by Frank of Trading The Odds (post here). One point, brought up by Tony Cooper of Double Digit Numerics, the original author of the paper that Trading The Odds now trades (I consider it a huge honor that my blog is read by authors of original trading strategies), is that m...
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An Update to the Robustness Heuristic and a Variation of a Volatility Strategy
So, before revealing a slight wrinkle on the last strategy I wrote about, I’d like to clear up a bit of confusion regarding Jaekle and Tomasini’s idea of a stable region. Essentially, the entire idea *is* that similar parameter configurations behave in very similar ways, and so, are supposed to be highly correlated. It does not mean the strat...
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The ZOMMA Warthog Index
Harry Long posted another article on SeekingAlpha. As usual, it’s another “looks amazing at first glance, and winds up being disappointing compared to first impressions, but is still worth talking about” types of strategies. So here’s the strategy: Rebalance annually: 50% XLP, 15% GLD, 35% TLT — aka a variation of the stocks/bonds portf...
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A Way To Model Execution On Individual Legs Of A Spread In Quantstrat
In this post, I’ll attempt to address a question I’ve seen tossed around time and again regarding quantstrat. “How do I model executions on individual underlying instruments in spread trading?” First off, a disclaimer: this method is a bit of a kludge, and in using it, you’ll lose out on quantstrat’s inbuilt optimization functionality...
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Why Backtesting On Individual Legs In A Spread Is A BAD Idea
So after reading the last post, the author of quantstrat had mostly critical feedback, mostly of the philosophy that prompted its writing in the first place. Basically, the reason I wrote it, as I stated before, is that I’ve seen many retail users of quantstrat constantly ask “how do I model individual spread instruments”, and otherwise try...
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