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Mastering R for Quantitative Finance

You're reading from   Mastering R for Quantitative Finance Use R to optimize your trading strategy and build up your own risk management system

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Product type Paperback
Published in Mar 2015
Publisher
ISBN-13 9781783552078
Length 362 pages
Edition 1st Edition
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Toc

Table of Contents (15) Chapters Close

Preface 1. Time Series Analysis FREE CHAPTER 2. Factor Models 3. Forecasting Volume 4. Big Data – Advanced Analytics 5. FX Derivatives 6. Interest Rate Derivatives and Models 7. Exotic Options 8. Optimal Hedging 9. Fundamental Analysis 10. Technical Analysis, Neural Networks, and Logoptimal Portfolios 11. Asset and Liability Management 12. Capital Adequacy 13. Systemic Risks Index

The intensity of trading


The intensity of trading activities can be measured in a number of ways. The most common measure in use is volume, which is simply the number of shares traded during a certain time interval. Given that the liquidity (which shows how easy it is to trade an asset) and therefore the absolute trading activity in each stock is different, the volume expressed in percentage form is a more convenient choice for modeling purposes. This measure is called turnover, which is formally computed from volume, as follows:

Here, x stands for turnover, V for volume, and TSO for the total shares outstanding; the latter indicates the total number of shares available for public trading. The index i indicates the actual stock, and index t indicates the time interval.

As mentioned earlier, there are several stylized facts documented in volume. An obvious one is that volume is non-negative, given that it measures the number of traded shares. This number is zero, if there are no trades at all...

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