Quality Money Management : Process Engineering and Best Practices for Systematic Trading and Investment

The actual risk measurements can be displayed using quality control. We use these risk calculations and SPC to determine whether ...

234 CHAPTER ◆ 2 5 STAGE 4: Overview 25.6. LOOP 3: Assess Value at Risk STEP 1: Choose VaR Methodology STEP 2: Benchmark VaR Calc ...

tasks such a team with fixing trading/investment machines. The risk manager must understand all forms of traditional risk, stati ...

237 Plan Performance and Risk Processes CHAPTER ◆ 26 The inputs into a trading/investment system, that is, into the trade select ...

238 CHAPTER ◆ 2 6 Plan Performance and Risk Processes All these tool sets, however, generate estimates and forecasts that are on ...

239 systems. These calculations are similar to sensors on a machine, used in real time to focus the Six Sigma quality improvemen ...

240 CHAPTER ◆ 2 6 Plan Performance and Risk Processes etc. versus the benchmark, but to generate pure alphas without accepting u ...

241 whose makeup is constantly changing. However, this does not apply to high fre- quency trading or systems with high turnover ...

242 CHAPTER ◆ 2 6 Plan Performance and Risk Processes However, management should not reward product teams solely on beating a Mo ...

243 down into a single number that expresses the probability and size of loss in the future. There are six steps to forecasting ...

244 CHAPTER ◆ 2 6 Plan Performance and Risk Processes 26.4.1. Best Practices ● Plan to integrate evaluation of performance relat ...

245 Define Performance Controls CHAPTER ◆ 27 Perform SPC analysis Determine causes of variation Manage portfolio and risk Plan p ...

246 CHAPTER ◆ 2 7 Define Performance Controls 27.1. LOOP 1: Benchmark Single Performance Calculations Determining which metrics ...

positions. Implied volatility of poor credit companies would spike, stock price of poor credit companies would gap down, and you ...

248 CHAPTER ◆ 2 7 Define Performance Controls where: ● Q1 is the benchmark return, the weighted sum of the benchmark sector weig ...

249 where   1 is the speed of mean reversion toward the long-run value u , and the variance is proportional to the level of th ...

250 CHAPTER ◆ 2 7 Define Performance Controls Think again of the world of NASCAR. In the old days, only one thing mattered: trac ...

251 Perform SPC Analysis Because of the uncontrollable variations of the inputs from the real world, a trading/investment system ...

252 CHAPTER ◆ 2 8 Perform SPC Analysis 100% inspection of inputs and outputs since there are essentially no additional costs ver ...

253 respect to the system and its performance. Quality practitioners solve basic problems with seven basic tools: ● Fishbone dia ...