<t>Buy-side quants are woefully underrepresented in these forums. I appear to be one of the few, having worked as an equity strategist/portfolio manager for 14 years. The sell-side quants work with risk-neutral or Q-measure probability distributions and are primarily concerned with estimating the cu...

<r>There's a ton of literature on t-cost modeling. Some people make a career out of it. For an introductory discussion see Grinold & Kahn who present a simple model of transaciton costs. You only have to go a little further to operationalize their model. For something more advanced see maybe Kis...

You need a transaction cost model. A simple one using the half spread and a non-linear market impact term might suffice for you.

<t>I don't recall them talking about mean-reversion, but it's been quite a while since I read it. It's not a tough paper. I think a model using the difference of two moving averages would be a classic and simple trend-following strategy. My understanding is that currencies tend to trend best, or use...

<r>I believe the idea is that trend-following strategies can be effectively modeled using lookback straddles, which comes from a famous paper by Fung & Hsieh, "The Risk in Hedge Fund Strategies: Theory and Evidence from Trend Followers". <URL url="http://faculty.fuqua.duke.edu/~dah7/RFS2001.pdf"...

<t>You want to use the Fama-MacBeth method. I'm unclear from your description about which of your matrices holds your "factor exposures", but the procedure is to estimate a series of weighted cross-sectional regressions of the returns on the standardized factor exposures, one time period at a time. ...

<t>I don't mean to be rude, but if your written communication skills are in any way representative of your verbal communication skills, I'd think that you'd need to refine both before you'd be given the opportunity to interact with clients; at least native English-speaking clients. There is a reason...

<t>I did this work some while ago, but I vaguely recall being able to somewhat model the implied vols for US equity indexes for deltas in the range 0.025-0.975, but found that they go annoyingly hyperbolic at the edges. The problem arose when I had to extrapolate to estimate implied vols beyond this...

These vol smiles vs delta are much better behaved than those I've seen for the US Equity indexes. I gave up on trying to model the smile vs delta for the full range of deltas (roughly, from 0.025 to 0.975) and just went with log moneyness and a used a spline.