Gambling is when you know your expected value is less than zero.Trading or Investing is when you think your expected value is greater than zero.

<t>Trivia question:Who was the first person to use the word “martingale” to describe a certain type of stochastic process, and why did they choose this word.Previous historical definitions of the word martingale:1589 – A strap(s) fastened at one end to the bit and at the other to the girth, to preve...

<t>Trivia question:Who was the first person to use the word “martingale” to describe a certain type of stochastic process, and why did they choose this word.Previous historical definitions of the word martingale:1589 – A strap(s) fastened at one end to the bit and at the other to the girth, to preve...

<t>Sofiger:OAS can be used for adjustable and fixed rate securities. What is important about OAS is its use for securities with "embedded options" such as a callable bond or a mortgage, where the borrower has the option to payoff the loan.Most securities are priced off the forward rate curve, but th...

<t>Just to add my "two cents" to this discussion. OAS is most commonly used with MBS's and Callable Bonds. Monte Carlo simulation is the most widely used approach with OAS. I have not seen a "binomial tree" used with OAS. Here's my definition of OAS from a mortgage loan perspective:Option Adjusted S...

<t>DavidJN:Your example makes sense. If I understand you correctly, the following examples would explain the difference in duration and interest rate risk: If we lived in an “unreal” world where all floating rate securities regardless of term were forced by law to pay only LIBOR+0bp, then I would as...

<t>DavidJN:Your comment is exactly right. Locking in the credit spread for 30-years is quite different than the 6-month security credit spread. However, I am trying to look at this problem from a purely interest rate risk prospective, and not include credit risk in the model. Again, to be more speci...

<t>exotiq:In theory, I agree that the two securities should have the same interest rate risk, since the 30-year security can be replicated by rolling over the 6-month security every 6-months for 30 years.However, when I run different interest rate risk models (QRM, Sendero, etc.) comparing the 30-ye...

<t>Assume, in a perfect world with no lags, caps, floors, etc, you have a 30 year floating rate security that resets to 6 Month LIBOR every six months. You also have a 6-month maturing security also based on 6 month LIBOR. Both securities use the same index, reset characteristics, cash flows etc., b...

<t>jkalman:I think you are misunderstanding what I am looking for. Your analysis is based on the correlation between assets in a portfolio. What I am referring to is when there is serial correlation in the actual trades in a sequence of trades. For example, if there is positive serial correlation in...

<t>quantie:In the presence of "perfect" positive (+1) or negative (-1) serial correlation, you would know exactly what the next result would be, and your optimum bet would be to "bet it all". You are correct. However, what I am referring to, is when serial correlation between bets or trades is betwe...

Bump

<t>There has been a large quantity of literature produced over the last few decades regarding optimal betting strategies based on Kelly betting and Optimal f. The purpose of my question is not to “re-hash” these same old formulas again. I am assuming these strategies are based on zero correlation be...

<t>Lenni:Here's a method I use to speed up spreadsheets with alot of data and formulas. By default, Excel's "Undo" feature is set to 16 levels. That is quite a large amount of RAM dedicated to undoing mistakes. In the Windows' registry, you can add a line to set Excel's "undo" level to zero. This sh...

QuoteWe employed two core strategies with mathematical edges ranging from 4% to 25%Dunlegging:I would be interested to know what strategies yield edges of 4% to 25%. Shuffle Tracking? Dealer hole card peeking?