This book directly focuses on finding optimal trading strategies in the real world and supports that with a well-defined theoretical foundation that allows trading strategy problems to be solved. Critically, it also delivers a menu of actual solutions that can be applied by traders with various risk profiles and objectives in markets that exhibit substantial tail risk. It shows how the Markowitz approach leads to excessive risk taking, and trader underperformance, in the real world. It summarizes the key features of Utility Theory, the deficiencies of the Sharpe Ratio as a statistic, and develops an optimal decision theory with fully developed examples for both 'Normal' and leptokurtotic distributions.
Contents:
- Preface
- About the Author
- List of Figures
- List of Tables
- Introduction
- Mean–Variance Optimization and the Sharpe Ratio
- Analytical Framework
- Utility Theory-Based Portfolio Choice
- Thinking about How to Solve Trading Problems
- Barrier Trading Algorithms
- Ex Post Analysis
- References
- Index
Readership: For researchers, students and professionals like finance professionals, data scientists, economists, investment managers and fund managers.
'Graham Giller presents his largely original thoughts on topics in quantitative finance. All users of the Sharpe ratio can benefit from his analysis of its sampling distribution and its often surprisingly large spread. He draws from his background in physics, mathematics, economics and real-world trading.' - Edward O Thorpauthor of A Man For All Markets and Beat the Dealer
'Giller goes the extra mile (and where required the extra term) to lay out a framework for alpha exploitation that is statistically rigorous yet convenient to use.' - Peter Cottonauthor of Microprediction
Key Features:
- This book explores and addresses the process of designing and optimizing trading strategies outside of the Markowitz and Kelly approach
- It delivers a variety of solutions and strategies that are applicable to investment professionals of various risk profiles and objectives
- The book examines the process of moving towards an optimal position in real markets with substantial tail risk to the trader