Marcos López de Prado

Learn More
Laboratory for confirming our VPIN calculations on the 'flash crash'. We are grateful to Sergey Kosyakov and Steven Jones for their research assistance. * VPIN is a trademark of Tudor Investment Corp. The authors have applied for a patent on VPIN and have a financial interest in it. ABSTRACT Order flow is toxic when it adversely selects market makers, who(More)
Recent computational advances allow investment managers to methodically search through thousands or even millions of potential options for a profitable investment strategy. In many instances, the resulting strategy involves a pseudo-mathematical argument, which is spuriously validated through a simulation of its historical performance (also called(More)
We solve a multi-period portfolio optimization problem using D-Wave Systems' quantum annealer. We derive a formulation of the problem, discuss several possible integer encoding schemes, and present numerical examples that show high success rates. The formulation incorporates transaction costs (including permanent and temporary market impact), and,(More)
A large portion of Macroeconomic and Financial research is built upon classical applications of Linear Algebra (such as regression analysis) and Stochastic Calculus (such as valuation models). As a result, most Macroeconomic and Financial research has inherited a focus on geometric locations rather than logical relations. Ideally, Econometric models could(More)
Accurate assessment of muscular strength is critical for exercise prescription and functional evaluation. The warm-up protocol may affect the precision of the 1 repetition maximum (1RM) test. Testing guidelines recommend performing both general and specific warm-ups before strength tests. The general warm-up intends to raise muscle temperature, whereas the(More)
Recent computational advances allow investment managers to search for profitable investment strategies. In many instances, that search involves a pseudo-mathematical argument, which is spuriously validated through a simulation of its historical performance (also called backtest). We prove that high performance is easily achievable after backtesting a(More)
Execution traders know that market impact greatly depends on whether their orders lean with or against the market. We introduce the OEH model, which incorporates this fact when determining the optimal trading horizon for an order, an input required by many sophisticated execution strategies. From a theoretical perspective, OEH explains why market(More)
Many investment firms and portfolio managers rely on backtests (i.e., simulations of performance based on historical market data) to select investment strategies and allocate capital. Standard statistical techniques designed to prevent regression overfitting, such as hold-out, tend to be unreliable and inaccurate in the context of investment backtests. We(More)