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Category: R

Backtesting Options Strategies in R

Published 2021-04-15 by Kevin Feasel

Holger von Jouanne-Diedrich is in the money:

Options trading strategies are strategies where you combine, often several, derivatives instruments to create a certain risk-return profile (more on that here: Financial Engineering: Static Replication of any Payoff Function). Often we want to know how those strategies would fare in the real world.

The problem is that real data on derivatives are hard to come by and/or very expensive. But we help ourselves with a very good proxy: implied volatility which is freely available for example for many indices. With that, we can use the good old Black-Scholes model to reasonably price options whose strikes are not too far away from the current price of the underlying.

Read on to see how.

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Simulating Prediction Intervals

Published 2021-04-12 by Kevin Feasel

Bryan Shalloway continues a series:

Part 1 of my series of posts on building prediction intervals used data held-out from model training to evaluate the characteristics of prediction intervals. In this post I will use hold-out data to estimate the width of the prediction intervals directly. Doing such can provide more reasonable and flexible intervals compared to analytic approaches.

Click through for the article, and be sure to check out part 1 if you haven’t already.

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spkarlyr 1.6 Released

Published 2021-04-06 by Kevin Feasel

Carly Driggers announces a new release of sparklyr:

Sparklyr, an LF AI & Data Foundation Incubation Project, has released version 1.6! Sparklyr is an R Language package that lets you analyze data in Apache Spark, the well-known engine for big data processing, while using familiar tools in R. The R Language is widely used by data scientists and statisticians around the world and is known for its advanced features in statistical computing and graphics. 

Click through to see the changes.

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Working with Prediction Intervals

Published 2021-03-31 by Kevin Feasel

Bryan Shalloway explains how generating prediction intervals is different from making point predictions:

Before using the model for predictive inference, one should have reviewed overall performance on a holdout dataset to ensure the model is sufficiently accurate for the business context. For example, for our problem is an average error of ~12% and 90% prediction intervals of +/- ~25% of Sale_Price useful? If the answer is “no,” that suggests the need for more effort in improving the accuracy of the model (e.g. trying other transformations, features, model types). For our examples we are assuming the answer is ‘yes,’ our model is accurate enough (so it is appropriate to move-on and focus on prediction intervals).

Click through for the article.

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Last Observation Carried Forward in R

Published 2021-03-24 by Kevin Feasel

Nathan Eastwood shows how to perform Last Observation Carried Forward in R:

Real life data is often riddled with missing values – or NAs – where no data value are stored for the variable in observation. Missing data such as this can have a significant effect on the conclusions which can be drawn from the data. For example individuals dropping out of a study or subjects not properly reporting responses. A common solution to this problem is to fill those NA values with the most recent non-NA value prior to it – this is called the Last Observation Carried Forward (LOCF) method.

This blog post will look at how to implement this particular solution using a combination of {dplyr}, {dbplyr} and {sparklyr}.

Click through for the solution.

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Generating Random Numbers in R

Published 2021-03-24 by Kevin Feasel

Holger von Jouanne-Diedrich brings the noise:

In data science, we try to find, sometimes well-hidden, patterns (= signal) in often seemingly random data (= noise). Pseudo-Random Number Generators (PRNG) try to do the opposite: hiding a deterministic data generating process (= signal) by making it look like randomness (= noise). If you want to understand some basics behind the scenes of this fascinating topic, read on!

Click through for an explanation of the process.

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Creating a Rose Chart in R

Published 2021-03-23 by Kevin Feasel

Neil Saunders takes a look at a classic chart:

I first heard Florence Nightingale and her Geeks Declare War on Death, an episode of the Cautionary Tales podcast, premiered as a special episode of 99% Invisible. It discusses Nightingale’s work as a statistician and in particular, her visualisation of mortality causes in the Crimean War using the famous “rose chart”, or polar area diagram.

I’m sure you’re thinking: how can I explore that using R? 

Read on to find out.

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knitr Options and Hooks

Published 2021-03-17 by Kevin Feasel

The folks at Jumping Rivers conclude a series:

As with many aspects of programming, when you are working by yourself you can be (slightly) more lax with styles and set-up. However, as you start working in a team, different styles can quickly become a hindrance and lead to errors.

Using {knitr} is no different. When you work on documents with different team members, it’s helpful to have a consistent set of settings. If the default for eval changes, this can easily waste time as you try to track down an error. At Jumping Rivers, we use {knitr} a lot. From our training courses, to providing feedback to clients, to constructing monthly reports on clients infrastructure. The great thing about {knitr} is it’s really easy to customise. The bad thing is that without some care, it’s really easy for every member of the team to have different default options. This proliferation of different default options, means that when we pick up someone else document, mistakes may creep in.

Read on for different options they use to keep things consistent.

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Fuzzy Joins in SQL Server using R

Published 2021-03-16 by Kevin Feasel

Rajendra Gupta shows how you can use R in SQL Server Machine Learning Services to perform fuzzy joins:

Suppose you have a web page where users right comments in the text box. You are performing data analysis. However, there are few spelling mistakes, and you want to perform the approximate match or fuzzy lookup in another dataset. Similarly, you have a product catalog database. Your users search for a product; however, they might not type the exact keyword for the product name. Using the fuzzy joins, we can return the user the products with an approximate match to the product names.

SQL Server Machine Learning using R scripts enables you to execute the R language queries inside the SQL Server. In the previous articles, we explored a few use-cases of the machine learning language. In the previous articles, we explored the R scripts for the below topics.

It’s R, so there’s already a package in CRAN for that.

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k-gram Language Models in R

Published 2021-03-16 by Kevin Feasel

Valerio Gherardi takes us through the concept of k-grams:

The post is structured as follows: we start by giving a succinct theoretical introduction to kk-gram models. Subsequently, we illustrate how to train a kk-gram model in R using kgrams, and explain how to use the standard perplexity metric for model evaluation or tuning. Finally, we use our trained model to generate some random text at different temperatures.

This goes into some depth on the topic and is worth giving a careful read.

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