Two Period Kyle (1985) Model


1. Motivation This post shows how to solve for the equilibrium price impact and demand coefficients in a $2$ period Kyle (1985)-type model where informed traders see a noisy signal about the fundamental value of a single asset. There are various … [Continue reading]

Wavelet Variance


1. Motivation Imagine you're a trader who's about to put on a position for the next month. You want to hedge away the risk in this position associated with daily fluctuations in market returns. One way that you might do this would be to short the … [Continue reading]

WSJ Article Subject Tags


1. Motivation This post investigates the distribution of subject tags for Wall Street Journal articles that mention S&P 500 companies. e.g., a December 2009 article entitled, When Even Your Phone Tells You You're Drunk, It's Time to Call a … [Continue reading]

Randomized Market Trials


1. Motivation How much can traders learn from past price signals? It depends on what kind of assets sell. Suppose that returns are (in part) a function of $K = \Vert {\boldsymbol \alpha} \Vert_{\ell_0}$ different feature-specific … [Continue reading]