<t>My question is about Annualizing Returns and Standard Deviations. Would like to confirm that this is the right way to do it.Lets says I have dailyReturns from a backtest. In order to calculate the Arithmetic Cumulative Returns, I use the following formula: SUM(dailyReturns) and in order to annual...

thanks for providing an explanation in lay man terms. Sometimes, we all get caught up in jargons that we dont the practical aspects of the theory.

<r>One more thing, usually traders use variance swaps to hedge off their vol risk that one might have from some other product. It is hard to make money trading pure variance swaps (just being long) because they trade at fairly high premium above ATM vol. If you buy var swaps you are betting that rea...

In practice, you can use equity or index options to hedge your var swaps. Exact replication by using calls and puts to hedge is very costly and a loser.

<t>Thanks buddy for the 2 measures.... The Expected shortfall looks interesting.Took me a couple of days to implement the stuff below. But i wanted to ask if i am interested in calculating a rolling Expected Shortfall & VAR on a daily basis for every trading day of my backtest - do i have to run...

http://web.mit.edu/alo/www/Papers/august07.pdf

No worries... i wrote the code my self.

Does anybody here have a C++. C# or VBA implementation of drawdown and run-up?

<r>Options tend to loose a lot of their vega values close to expiration. Their moves are primarily dominated by the gamma. From what I know, expiry may not have any kind of correlation with volatility. But on the last day of expiration, stocks tend to get pinned. Here is a classical explanation of w...

<t>Hey guys,I am designing a library that will measure the performance of the backtest given the daily PNL for any time period. Here is a list of measures that I am using. I was wondering if you guys could provide me with pointers to look for other measures that hedge fund managers / quant strategis...

Thanks for the feedback guys. I figured it out. The software takes monthly returns as the input. Jawabean - you are right as well about I have to do something like "x^(1/12)" along these lines

<t>I just need to make sure that I am using the correct formula:Lets say I have a time series data of daily returns, then in order to calculate the geometric compounded return I am using the following formula:[CumProduct ( 1 + ri)] - 1 where i = 1 to nIf I want to annualize it, then i multiply [CumP...

<r>Check out the following 2 links:<URL url="http://www.wilmott.com/messageview.cfm?catid=4&threadid=56727http://terreneuve.sourceforge.net/What"><LINK_TEXT text="http://www.wilmott.com/messageview.cfm? ... e.net/What">http://www.wilmott.com/messageview.cfm?catid=4&threadid=56727http://terre...

ppauper, your comment is funny...cracked me up.

<t>I took a class at NYU with the owner of the company - Lee Maclin is the guy. I have been in the algorithmic trading business for a while and the kind of optimal trading strategies these guys have modelled in their software is more advanced than anything else you will see. Its an excellent option ...