Editor’s note: this proof was entirely generated by ChatGPT 5.6, I didn’t contribute anything! I’m publishing this in case it will be a useful reference for others. In identity testing, we know a reference distribution $q$, receive independent samples from an unknown distribution $p$, and want to distinguish \[p=q \qquad\text{from}\qquad d_{\mathrm{TV}}(p,q)>\varepsilon.\] The usual worst-case…
A few days ago, I had the realization that nearly every profitable trading alpha I’ve found can be formalized as an instance of boosting—adding a small, targeted correction on top of a strong base model. This is obvious to seasoned practitioners, but I’ve found it to be a surprisingly useful mental checklist when evaluating new ideas. A simplistic boosting algorithm Fit a model \(f_1(x)\) to \(y\)…
Corey Hoffstein speaks with Edward Yu about his journey from the early days of crypto OTC markets to co-founding Variational. Edward shares insights into the evolution of crypto trading, the challenges of pricing in OTC markets, and the importance of understanding client relationships. They discuss Variational’s mission to bring the OTC derivatives market on-chain by introducing programmable…
OK quick thread on how I would price the @pumpdotfun ICO using options theory, and why there might be a trading opportunity! Skimming the market rules and doing a Google search, this seems to be a simple European binary call option with strikes at $4B, $5B, $8B, $10B. It expires in 49 hours and the current underlying price can be obtained from the Hyperliquid pre-market @ $5.353B FDV. If we use…
A collection of quotes, presented without comment, implying that we hedge too much and this is bad. In fact, one year, Jeff Yass told us not to hedge. Felt mildly sick not hedging ever, but Fearless Leader is always based, logical and correct. — @moreproteinbars -EV hedges have never been my speed. — @AlamedaTrabucco I don’t really like hedging. — Stanley Druckenmiller or do the arb but just trade…
This is reposted from X . The original impetus for the thread was: @ThinkingUSD Will bet any amount of Money Hyperliquid flips Solana price by end of 2026. Last edited 7:07 AM · May 20, 2025 Okie dokie let’s do a quick thread on how I would think about pricing this. Caveat: only spent like 15 min or so thinking about this, feel free to debate in the comments. That being said, down to do a small…
In my last essay , I wrote about the long term vision of Variational as a collection of distinct financial subnetworks that could enable the creation of programmable derivatives. Clearly, that’s still many years away, so today I want to highlight the near term vision for Omni , the retail-focused crypto perpetuals trading platform built on Variational Protocol. The 10x improvement for users is…
If you asked me to describe the end goal for Variational , I would say: programmable derivatives . A longer explanation: providing infrastructure to power the world’s derivatives markets, allowing for permissionless creation of arbitrary derivatives and support for the full trade lifecycle, from matching orders to clearing to settlement. If that sounds like a lofty goal, that’s because we’re not…
The market maker vs the path-independent options trader There’s a common school of thought which views options as discrete, static bets. Check out Reddit’s wallstreetbets community for plenty of examples where a degenerate gambler buys 0DTE options and holds them to expiry; if they expire in the money then he celebrates his newfound riches, and if not then he loses everything. I wouldn’t say it’s…
I want to start writing more, and publish the posts on this website. My primary intended audience is actually myself. The world is changing so fast, and we are changing with it. I want to look back years later and have a snapshot of what my philosophy was at the time, and perhaps chuckle at how naive I was. I’ve never been one to give advice to other people anyhow, because our life circumstances…
This is a collection of various tidbits I learned during my time in quant finance, mostly as notes to myself. Your mileage may vary. On edge An edge tends to have certain unpleasant characteristics. Perhaps the capacity is low, or the returns are highly negatively skewed. The unpleasantness can be used as a sanity check that the edge in fact exists. Oftentimes there is not enough data to generate…
Background Perhaps lost in the whirlwind of presidential name-calling, a lesser-known multi-year old feud has resurfaced on Twitter this election season. Nate Silver is the founder of FiveThirtyEight and is a popular statistician frequently called upon by media members to give commentary and expertise on election forecasting. Nassim Taleb is a statistician/quant turned philosopher, perhaps most…
