Grant Trading Risk

Enhanced Profitability through Risk Control
1. Auflage 2004
ISBN: 978-0-471-69156-3
Verlag: John Wiley & Sons
Format: PDF
Kopierschutz: Adobe DRM (»Systemvoraussetzungen)

E-Book, Englisch, 272 Seiten, E-Book

Reihe: Wiley Trading Series

Revolutionary techniques that traders can implement to improveprofits and avoid losses
No trader, professional or individual, can afford not to have asolid risk management program integrated into his or her tradingsystem. But finding a precise mathematical model to replacesubjective decision-making processes is a challenge. Traditionally,risk management has focused solely on loss avoidance, but inTrading Risk, hedge fund risk manager Kenneth Grant presentssome-thing completely new--how to manage a portfolio tominimize risk and increase profits by putting more capital at risk.Trading Risk details a risk management program that can help bothmoney managers and individual traders evaluate which elements in aportfolio are working efficiently and which aren't. Byillustrating an extremely simple set of statistical and arithmetictools this book can help readers enhance their performance in manyfinancial markets.
Kenneth L.Grant is Cheyne's Global Risk Manager, and isthe Managing Member for Cheyne Capital, LLC, the firm's U.S.arm. Mr. Grant is a pioneer in the field of hedge fund riskmanagement and capital allocation. Before joining Cheyne, hecreated risk control programs at two of the world's leadinghedge funds, Tudor Investments and SAC Capital, where he waseventually promoted to the title of Chief Investment Strategist.Mr. Grant holds a Bachelor of Science in Economics and Mathematicsfrom the University of Wisconsin, an MA in Economics from ColumbiaUniversity, and an MBA from the University of Chicago GraduateSchool of Business.

Autoren/Hrsg.

Grant, Kenneth L.

Inhaltsverzeichnis

PREFACE.
ACKNOWLEDGMENTS.
CHAPTER 1: The Risk Management Investment.
CHAPTER 2: Setting Performance Objectives.
Optimal Target Return.
Nominal Target Return.
Stop-Out Level.
The Beach.
CHAPTER 3: Understanding the Profit/Loss Patterns overTime.
And Now to Statistics, but First a Word (or More) about TimeSeries Construction.
Time Units.
Time Spans.
Graphical Representation of Daily P/L.
Histogram of P/L Observations.
Statistics.
A Tribute to Sir Isaac Newton.
Average P/L.
Standard Deviation.
Sharpe Ratio.
Median P/L.
Percentage of Winning Days.
Performance Ratio, Average P/L, Winning Days versus LosingDays.
Drawdown.
Correlations.
Putting It All Together.
CHAPTER 4: The Risk Components of an IndividualPortfolio.
Historical Volatility.
Options Implied Volatility.
Correlation.
Value at Risk (VaR).
Justification for VaR Calculations.
Types of VaR Calculations.
Testing VaR Accuracy.
Setting VaR Parameters.
Use of VaR Calculation in Portfolio Management.
Scenario Analysis.
Technical Analysis.
CHAPTER 5: Setting Appropriate Exposure Levels (Rule1).
Determining the Appropriate Ranges of Exposure.
Method 1: Inverted Sharpe Ratio.
Method 2: Managing Volatility as a Percentage of TradingCapital.
Drawdowns and Netting Risk.
Asymmetric Payoff Function.
CHAPTER 6: Adjusting Portfolio Exposure (Rule 2).
Size of Individual Positions.
Directional Bias.
Position Level Volatility.
Time Horizon.
Diversification.
Leverage.
Optionality.
Nonlinear Pricing Dynamics.
Relationship between Strike Price and Underlying Price(Moneyness).
Implied Volatility.
Asymmetric Payoff Functions.
Leverage Characteristics.
Summary.
CHAPTER 7: The Risk Components of an IndividualTrade.
Your Transaction Performance.
Key Components of a Transactions-Level Database.
Defining a Transaction.
Position Snapshot Statistics.
Core Transactions-Level Statistics.
Trade Level P/L.
Holding Period.
Average P/L.
P/L per Dollar Invested (Weighted Average P/L).
Average Holding Period.
P/L by Security (P/L Attribution).
Long Side P/L versus Short Side P/L.
Correlation Analysis.
Number of Daily Transactions.
Capital Invested.
Net Market Value (Raw).
Net Market Value (Absolute Value).
Number of Positions.
Holding Periods.
Volatility/VaR.
Other Correlations.
Final Word on Correlation.
Performance Success Metrics.
Methods for Improving Performance Ratios.
Performance Ratio Components.
Maximizing Your P/L.
Profitability Concentration (90/10) Ratio.
Putting It All Together.
CHAPTER 8: Bringin' It on Home.
Make a Plan and Stick to It.
If the Plan's Not Working, Change the Plan.
Seek to Trade with an "Edge".
Structural Inefficiencies.
Methodological Inefficiencies.
Play Your P/L.
Avoid Surprises--Especially to Yourself.
Seek to Maximize Your Performance at the Margin.
Seek Nonmonetary Benefits.
Apply Liberal Doses of Humility and Humor.
Be Healthy/Cultivate Other Interests.
APPENDIX: Optimal f and Risk of Ruin.
Optimal f.
Risk of Ruin.
INDEX.

Über Autor(innen)

Kenneth L.Grant is Cheyne's Global Risk Manager, and is theManaging Member for Cheyne Capital, LLC, the firm's U.S. arm.Mr. Grant is a pioneer in the field of hedge fund risk managementand capital allocation. Before joining Cheyne, he created riskcontrol programs at two of the world's leading hedge funds,Tudor Investments and SAC Capital, where he was eventually promotedto the title of Chief Investment Strategist. Earlier in his career,Mr. Grant led risk management efforts for the Chicago MercantileExchange and Société Générale. He is also amember of the Board of Directors of the Managed Futures Association(MFA), and is a founding member of MFA's Hedge Fund AdvisoryCommittee-the industry's leading trade relationsorganization. He is a principal author of MFA's SoundPractices for Hedge Fund Managers (2000). Mr. Grant holds aBachelor of Science in Economics and Mathematics from theUniversity of Wisconsin, an MA in Economics from ColumbiaUniversity, and an MBA from the University of Chicago GraduateSchool of Business.