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Stat Arb Profile picture
@quant_arb
Mar 15, 2022 • 7 tweets • 5 min read • Read on X
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WSB next:
Nothing but memes today
The legend goes on…
And some O’rly? (O’reily editions)
They work at Barclays or Citi

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More from @quant_arb

Stat Arb Profile picture
Mar 24
A thread on all the components of latency, optimizations, & assumptions with modelling it.

...
This will primarily be for HFT, and focus on digital assets, but I will explain which parts are digital assets specific and which parts are not as much of it is generally applicable.

...
So what are the 3 "components" to our latency:

1. Our compute
2. The network
3. The matching engine

...
Read 25 tweets
Stat Arb Profile picture
Nov 24, 2024
Taker v.s. Market Maker Alphas

A thread on how they differ

...
This is just my own mental framework for it, and others may view it their own way, but I think this will be helpful regardless.

Anyways, let's define taker and maker alphas.

...
When *I* talk about maker alphas, I'm talking about features used to predict fair value when market making.

Any alpha can in theory can be traded into with limit orders, but there are two factors that decide whether you should.

...
Read 15 tweets
Stat Arb Profile picture
Oct 12, 2024
Finding Alpha 101:

Accumulated Improvement

…
What is accumulated improvement?

It’s the gains in performance you accumulate over time from tuning your strategy and improving it.

…
When it comes to non-HFT, accumulated improvement often leads to overfitting.

Continuing to tune the model once created often leads to decreases in performance other than simple re-fitting of the model on new data that has come out.

…
Read 11 tweets
Stat Arb Profile picture
Sep 28, 2024
Market Making 101 - Trade Impact

How to incorporate new trades into price.

…
Let’s say a new trade has occurred on an exchange, if we have a latency edge we want to be one of the people incorporating it into price instead of one of the people reacting to price changes.

…
As we can see based on this below Pepe, a trade will cause an initial spike before a much slower levelling off.

Where it levels off to (relative to starting point) is going to be important to know as well as both the spike up and return points.

… Image
Read 10 tweets
Stat Arb Profile picture
Sep 21, 2024
QR0 - Fill Probability Analysis

A thread 🧵

...
Fill probability analysis is primarily useful when optimizing maker/taker trades.

These are trades where the first leg we make into and then the rest of the legs are takers.

This is a limit order and then market orders the rest of the way (either limit IOC or market)

...
An example of this is triangular arbitrage, where we make into the first leg and then use taker orders to exit.

How can we estimate the probability of getting filled at any given level, and thus use this information to determine the optimal amount of spread to quote?

...
Read 13 tweets
Stat Arb Profile picture
Sep 18, 2024
Market Making 101 - Marks

A thread 🧵

…
What is a mark? Well a mark is how we value something.

We can mark to model (our own subjective value of what something is worth), or mark to market (the current price), or mark to cost to close (market price with liquidity cost factored).

…
That’s mostly accounting systems though. Let’s talk about the relevant part for market making.

Mark outs.

…
Read 14 tweets

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