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To what extent does the industry use Bayesian methods? It seems to me that, for a given trading strategy, trading companies are really interested in the mean pr
by cgold 12y ago
To what extent does the industry use Bayesian methods? It seems to me that, for a given trading strategy, trading companies are really interested in the mean profit impact of the strategy and its distribution (e.g. "there is a 10% change we will lose more than $20M"). Bayesian methods will naturally produce such an answer.
Bayesian methods won't magically solve all problems (e.g. fitting to historical data) but could make the assumptions more clear.
- throwaway183839 12y agoI can't speak for other teams, obviously. But almost everything we do would fall under the heading of "Bayesian methods". It's such a broad term that it would be hard to write a trading algorithm that couldn't be described as Bayesian.