Search results
Results From The WOW.Com Content Network
Because of the large number of stocks involved, the high portfolio turnover and the fairly small size of the effects one is trying to capture, the strategy is often implemented in an automated fashion and great attention is placed on reducing trading costs. [2] Statistical arbitrage has become a major force at both hedge funds and investment banks.
Taleb and Holy Grail Distributions. In economics and finance, a Taleb distribution is the statistical profile of an investment which normally provides a payoff of small positive returns, while carrying a small but significant risk of catastrophic losses.
High-frequency trading is quantitative trading that is characterized by short portfolio holding periods. [33] All portfolio-allocation decisions are made by computerized quantitative models. The success of high-frequency trading strategies is largely driven by their ability to simultaneously process large volumes of information, something ...
For premium support please call: 800-290-4726 more ways to reach us
In capital markets, low latency is the use of algorithmic trading to react to market events faster than the competition to increase profitability of trades. For example, when executing arbitrage strategies the opportunity to "arb" the market may only present itself for a few milliseconds before parity is achieved.
Portfolio optimization is the process of selecting an optimal portfolio (asset distribution), out of a set of considered portfolios, according to some objective.The objective typically maximizes factors such as expected return, and minimizes costs like financial risk, resulting in a multi-objective optimization problem.
A hedge fund might sell short one automobile industry stock, while buying another—for example, short $1 million of DaimlerChrysler, long $1 million of Ford.With this position, any event that causes all auto industry stocks to fall will cause a profit on the DaimlerChrysler position and a matching loss on the Ford position.
The portfolio's delta (assuming the same underlier) is then the sum of all the individual options' deltas. This method can also be used when the underlier is difficult to trade, for instance when an underlying stock is hard to borrow and therefore cannot be sold short .