Tag: prediction

Understanding Hidden Variables with Python - Research Roadmap

Post Outline * Motivating the Journey * Where Do Edges Come From? * The Problem with Traditional Research * The Hidden Side * A Brief Description: * Part 1 - A Visual Introduction to Hidden Markov Models with Python * Part 2 - Exploring Mixture Models with Scikit-Learn and Python * Part 3 - Predicting Market Bottoms with Scikit-Learn and Python Motivating the Journey Where do Edges Come From? Edges come from superior ability to identify and execute profitable strategies

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Using Implied Volatility to Predict Equity/ETF Returns

During a discussion with an knowledgeable options trader, I was told the significance of interpreting the "Implied Volatility Skew" for stocks and given a paper to read for homework. To get a basic understanding of Implied Volatility Skew see this link here. The paper I was told to read was "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. In their paper they show empirically, using their SKEW measure, allowed one to p

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