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Author Topic: Black Swan Events and Multiple Algos  (Read 1414 times)
bb113
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June 24, 2012, 03:33:09 AM
 #1

So there are at least a few people here running multiple models that they pick and choose to trade based on, whether using computers or elliot wave theory. Do the events of earlier today put you at a disadvantage?

It seems to me every time one of these technical difficulties occurs the market becomes "wary" and kind of resets, negating recent info that has been included in the models.

I'm just interested to know how people deal with that situation.
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June 24, 2012, 03:37:39 AM
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Do the events of earlier today put you at a disadvantage?

You are referring to the unintentional halt in trading at Gox?
bb113
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June 24, 2012, 03:38:31 AM
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Do the events of earlier today put you at a disadvantage?

You are referring to the unintentional halt in trading at Gox?
Yes, sorry.
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June 24, 2012, 05:32:26 AM
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I think they are recalibrating right now...
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June 24, 2012, 06:19:54 AM
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The data from the trading glitch has actually produced some extra divergence in my models—half a percent or so. But I don't like to throw out data, it will take me a little bit to find a way to work it out.

Thank you for your acknowledgement. I am 12 and appreciate it.
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June 24, 2012, 05:47:48 PM
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The data from the trading glitch has actually produced some extra divergence in my models—half a percent or so. But I don't like to throw out data, it will take me a little bit to find a way to work it out.

Thank you for your acknowledgement. I am 12 (years old?) and appreciate it.
bb113
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June 24, 2012, 08:36:35 PM
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The data from the trading glitch has actually produced some extra divergence in my models—half a percent or so. But I don't like to throw out data, it will take me a little bit to find a way to work it out.

Thank you for your acknowledgement. I am 12 (years old?) and appreciate it.

It just means I'm new at it.
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June 26, 2012, 02:21:23 AM
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I want to learn about Kurtosis risk!

Explain it like I am 5...

Tongue

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bb113
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June 26, 2012, 02:27:57 AM
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I want to learn about Kurtosis risk!

Explain it like I am 5...

Tongue

Its the risk someone will smack you in the back of the head when you least expect it and you'll bite that tongue off.
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June 26, 2012, 02:41:21 AM
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Sorry, not picking on you, just pointing out the futility in trying to address some of the stuff. The problem is that the more accurate you want the information, the more technical it's gotta get, which is unfortunately the problem. I only consider myself slightly aware of some of these things, but doing research into why so many financial institutions like the Black-Scholes equation is a good start.

Fair warning though, it gets technical very quickly. There may be some Khan Academy tutorial that kind of gives a general overview, though.

http://en.wikipedia.org/wiki/Kurtosis_risk
http://en.wikipedia.org/wiki/Black%E2%80%93Scholes
http://en.wikipedia.org/wiki/Delta_hedging
http://www.youtube.com/watch?v=zFiGL7lxsxc

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bb113
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June 26, 2012, 02:54:40 AM
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Sorry, not picking on you, just pointing out the futility in trying to address some of the stuff. The problem is that the more accurate you want the information, the more technical it's gotta get, which is unfortunately the problem. I only consider myself slightly aware of some of these things, but doing research into why so many financial institutions like the Black-Scholes equation is a good start.

Fair warning though, it gets technical very quickly. There may be some Khan Academy tutorial that kind of gives a general overview, though.

http://en.wikipedia.org/wiki/Kurtosis_risk
http://en.wikipedia.org/wiki/Black%E2%80%93Scholes
http://en.wikipedia.org/wiki/Delta_hedging
http://www.youtube.com/watch?v=zFiGL7lxsxc

Haha I was just answering your question.
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July 03, 2012, 07:46:43 AM
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Black-Scholes and the assumption of a (normal) gaussian distribution in determining option pricing is one of the major flaws that blew up LTCM. The 'mean' should be thicker than the 'tails', and most price action disagrees. The number of two to three sigma events fall outside of the 'predicted' distribution, which means of course any assumptions based on that model are doomed to tail-risk of large magnitudes.

BTC is probably a more 'sane' market that anything out in the traded exchanges, if only by virtue of not having a crapload of sub-pennying front-running High-Frequency Trading algorithms dominating volume like the ES futures or the major Index stocks.

fortitudinem multis - catenum regit omnia
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