15.S12  SSIM: Data Technologies for Quantitative Finance

Project E: code sample and reading

Under the Tips section on Stellar there is a code sample with a query that aggregates data into 1-second bins. The top of the code, before the WHERE clause, is identical vtrade_1sec. It runs in well under a minute using SQL Mgt Studio as a client.

You can use other clients and other queries to get the job done; this is simply an example. However you do want the data filtering and aggregation to take place on the server: there of order 10^8 rows in the table, 10^6 that satisfy the date/symbol restrictions, and of order 10^5 bins after aggregation. Note that not all seconds from this query contain data and that empty points differ by stock.

Also, please read the paper on Stellar by Kirilenko et. al. on the flash crash for next time.

Announced on 04 December 2012  11:39  p.m. by Paul F. Mende

Project D Q&A

1) There is a typo in Problem 4: the closing date of the trade is November 13, 2009 -- not 2011. (If you can find someone willing to trade expired options then I have a Powerball ticket to sell.)

2) You have unlimited credit for class simulations. Therefore treat your trading as "self-financing," meaning that you start out with ZERO cash and the ability to borrow for purchases by letting your cash balance be negative. And cash, whether positive or negative, grows daily between rehedging at the risk-free rate. Do not worry about bankruptcy, margin, haircut, or Reg T.

3) Similarly, there are no constraints on selling short (if you find a need to). Short sales in these simulations are treated the same as if buying a negative number of shares. In real life, there are restrictions on short sales as well as on the use of proceeds; don't worry about that for this project.

4) Remember the multipliers: each option *contract* is on 100 shares. So if you sell 3 call contracts priced at $2 *per option*, then the cost is $600. And if the delta is 0.5 and the stock price is $17, you hedge by buying 0.5 x 3 x 100 = 150 shares. The cost is 150 shares * $17/share = $2550. Total change in cash balance: ZERO initial value becomes +$600 (proceeds of option sale) - $2550 (cost of stock hedge purchase) = -$1950. After one day, i.e., at the time just before the next re-hedge takes place, this negative balance will have grown. If the interest rate is 0.3%, then after one day the cash balance is -$1950 * (1 + 0.3%/252) = -$1950.023214....

As an aside, note that the market value of the portfolio is not very meaningful. The above hedge position is economically equivalent to being short 1.5 straddles (neglecting dividends and early exercise). Had we sold 1.5 calls and 1.5 puts at $2 each, our cash balance would be +$600 rather than negative, yet our financial exposure and risk is identical. It is the *changes* in MV from day to day which matter, and they should be the same either way for the most part.

-pfm

Announced on 28 November 2012  8:40  p.m. by Paul F. Mende

Project E posted

Project E has been shortened a bit and is available on Stellar. The due date is 12/12/12. Projects should ideally be submitted at precisely 12:12:12pm but can come in any time before midnight.

Announced on 28 November 2012  12:31  p.m. by Paul F. Mende

Project C has been graded

I have graded Project C and emailed graded project to the students. Please let me know if you have any questions.

Thanks

Puru

Announced on 27 November 2012  12:39  p.m. by Purushotham Botla

What's New on Stellar and Obelix for Data Technologies class

A number of new or recent items are available on Stellar:

- Project D, due Nov. 30th
- Project C solution set
- Up to date and revised lecture slides
- Classroom video
- Data models, now in a new section, for crispy, crispy04, and om in ERwin format
- Additional technology references
- MS Access file "twisty" containing OWC clients that link to data cubes in an environment where layout changes and configurations can be saved.

On obelix

- Web pages linked from obelix.mit.edu for XML Data Properties demo, as shown in class; additional office web component links.
- Options data through 2010 and 2011

N.B.: The latter data set is being loaded today and is very resource intensive, so do not be surprised if you experience slower responses Wednesday or Thursday. They should overlap directly with data required for the current Project D.

-pfm

Announced on 14 November 2012  11:22  p.m. by Paul F. Mende