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Stat Arb Profile picture
@quant_arb
Mar 15, 2022 • 7 tweets • 5 min read • Read on X
Scrolly
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
Aug 10
Here’s a quick thread on the essentials of a market making system that the pros use.

…
Let’s start right off the bat with the most important part of all, the fair value. Your fair value is what you quote around. It’s what you think a fair price for that asset is. How do we get it?

…
We start by trying to do a nowcast, this is simply trying to get what the market thinks the current price is. There are multiple prices across venues so this is important.

So perhaps aggregating multiple prices across exchanges, and weighting by volume or some other metric.

…
Read 10 tweets
Stat Arb Profile picture
Jun 22
Here’s a thread of all the material you need (that I’ve written) to learn some of the most advanced pairs trading techniques:

…
The greedy method:

Pt1:

algos.org/p/greedy-metho…

Pt2:

algos.org/p/greedy-metho…
Semi-Definite Programming:

algos.org/p/semi-definit…
Read 10 tweets
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

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