Nitro, I obviously am not privy to *FV internals, but I have something to relate from my experience. Partially motivated to the success I saw in NFV, I have done my own research over the past few months and I have found another financial time series which displays dependable predictive activity for SPX. That is to say, if this instrument moves and SPX does not, SPX tends to follow in the next short while. Could take half an hour, or a few days, to converge.
Actually, I should note that I have found several instruments such as this, however the one I am talking about is the only one that still exhibits this behavior.
That is important because I express the relationship in arbitrage, or pairs trading, terms, and thus structure my trades (so far automated, on paper) to follow. Thus I am either exposed long to SPX, and short the other instrument, or vice versa. I generally lose money on the other instrument, but net money overall, and in the rare event that SPX is the predictor, I am protected.
I mentioned that I only have one instrument with which this still works. Were I trading this system with one that doesn't, you can imagine that I would get erroneous results in regard to divergences, and probably lose money on a regular basis.
I have seen the other instruments break down in their ability to work in this system. The correlations no longer hold. So my point is, I don't know what mathematical principles *FV relies upon, but if in the end they imply some sort of correlation amongst various price instruments, perhaps those correlations have simply broken down?
Actually, I should note that I have found several instruments such as this, however the one I am talking about is the only one that still exhibits this behavior.
That is important because I express the relationship in arbitrage, or pairs trading, terms, and thus structure my trades (so far automated, on paper) to follow. Thus I am either exposed long to SPX, and short the other instrument, or vice versa. I generally lose money on the other instrument, but net money overall, and in the rare event that SPX is the predictor, I am protected.
I mentioned that I only have one instrument with which this still works. Were I trading this system with one that doesn't, you can imagine that I would get erroneous results in regard to divergences, and probably lose money on a regular basis.
I have seen the other instruments break down in their ability to work in this system. The correlations no longer hold. So my point is, I don't know what mathematical principles *FV relies upon, but if in the end they imply some sort of correlation amongst various price instruments, perhaps those correlations have simply broken down?
