@deltatrendtrading: Part 2 | Regime-switching Monte Carlo simulation allows us to capture the regime-dependence, and clustering nature of trades when we resample. We start by tagging every single trade in the back test with a regime label, then construct separate return distributions for each regime’s trades. We compute transition probabilities and normalize to a transition matrix for market regimes. Then, to actually create the equity paths, we pass through the transition matrix to decide which distribution we’re sampling from, then randomly sample a trade from that distribution and tack its return onto the equity path — so on and so on. #quant #quantfinance #quanttrading #montecarlo

Thomas

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Thursday 09 April 2026 01:00:38 GMT