An Interview Question

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An Interview Question

Postby jonylee » Sat Aug 30, 2008 1:49 pm

Hello, everyone, I got an interview question to which I was not sure how to answer. Anybody has good idea.

You have a simple strategy that (1) sells when the open today is bigger than a weighted sum of last n days' close and a threshold; and (2) buys when the open today is smaller than a weighted sum of last n days' close and a threshold. That is, we have an Indicator

I = -sgn(open - sum(w_i * close_i) - T), T is a threshold.

How can we build a mathematical model to analyse this strategy and how can we calibrate to the data.
jonylee
 
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