quant trading 101 nitish maini - amazon web servicescom.estimize.public.s3.amazonaws.com/l2q... ·...

Copyright © 2017 WorldQuant, LLC. All Rights Reserved. COMMERCIAL SECRET. THIS DOCUMENT CONTAINS CONFIDENTIAL AND PROPRIETARY INFORMATION OF WORLDQUANT, LLC. UNAUTHORIZED DISCLOSURE OR REPRODUCTION IS STRICTLY PROHIBITED AND MAY RESULT IN SERIOUS LEGAL CONSEQUENCES.

®

Quant Trading 101 Nitish Maini

October 11, 2017

General Manager, Virtual Research Center Vice President, Portfolio Manager & Analyst, Office of the CEO, at WorldQuant

This presentation is for general information and educational purposes only and is not necessarily indicative of WorldQuant’s business practices, policies and/or procedures.

®

1  QUANT VS. DISCRETIONARY TRADERS 2  WORLD OF QUANTS 3  WORLD OF ALPHAS 4  ALPHA DIVERSIFICATION PLAN: TAP 5  LINEAR REGRESSION ALPHA DEMO 6  CHECKLIST & VISUALIZATION 7  PROGRAMMING LANGUAGES

CONTENTS

COMMERCIAL SECRET. CONFIDENTIAL INFORMATION OF WORLDQUANT, LLC.

®

1. QUANT VS. DISCRETIONARY TRADERS

is an approach that seeks to choose investments based on human decision-making & develops over time.

is a rule-based strategy that utilizes computer models to identify investments and to execute most of the trades.

Page 3 COMMERCIAL SECRET. CONFIDENTIAL INFORMATION OF WORLDQUANT, LLC.

Discretionary Trading Quantitative Trading

® COMMERCIAL SECRET. CONFIDENTIAL INFORMATION OF WORLDQUANT, LLC.

2. WORLD OF QUANTS

•  Back-testing: By testing against historical data, Quants can set leverage based on the worst drawdown a given strategy has endured.

•  Diversification: Quants identify, trade and monitor multiple strategies across many markets for a large number of instruments.

•  Data: Quants can take advantage of the Big Data revolution.

•  Efficient: Because of the minimal human involvement required, burnout and execution mistakes can be reduced for Quants.


2. WORLD OF QUANTS

Capital Growth

Volumes Traded

In the past five years, quant strategies gained about 5.1% a year, while the average hedge fund rose 4.3%.

Quant strategies account for more than 30% ($932 billion) of all hedge fund assets, up from 25% ($408 billion) in 2009.

Source: WSJ, HFR Inc. & Tabb Group

Quants have nearly doubled their share of stock trades from 14% in 2013 to 27% today.

Average Returns

Images © SlideModel

®

RESULTS


3. WORLD OF ALPHAS

An alpha is a mathematical, predictive model of the performance of financial instruments.

IDEA

DATA

IMPLEMENTATION

BACK-TESTING


$ $

C


4. TRIPLE AXIS PLAN (TAP) OF DIVERSIFICATION

•  Provides a systematic approach to exploring the gigantic world of alphas

•  By freezing a target on one axis, gives Quants the flexibility to explore the other two axes.

•  Helps new Quants gather knowledge, develop relevant skills and provides alpha ideas

•  Helps experienced Quants identify untouched sources of alphas, add diversity and increase efficiency

Ideas & Datasets

Regions & Universes

Performance Parameters

TAP


4.1 AXIS 1: IDEAS & DATASETS

Ideas

1.   Reversion

2.   Momentum

3.   Seasonality

4.   Lead-Lag

5.   Learning…

Datasets

1.   Price Volume

2.   Fundamental

3.   Analyst

4.   Sentiment

5.   Options…



4.2 AXIS 2: REGIONS AND UNIVERSES



4.2 AXIS 2: REGIONS AND UNIVERSES

Universes 1.  Based on liquidity: e.g., TOP50, TOP3000… 2.  Particular sector or industry 3.  Selected instrument or group depending on the idea

0

2

4

6


®

SHARPE


4.3 AXIS 3: PERFORMANCE PARAMETERS

High

Low

RETURNS TURNOVER DRAWDOWN


5. LINEAR REGRESSION ALPHA

IDEA 1

Auto Regression WebSim Demo

Capture reversion in price by using the price forecasted by an

autoregressive model.

IMPLEMENTATION 2

Auto Regression

Past values can help forecast current values.


5. ALPHA CHECKLIST

Region and Universe Max Stock Fraction

Bias in Back-testing Alpha Type

Decay Unit Check

Delay Overfitting

PPPP

PPP

P


®

SHARPE

PNL


6. VISUALIZATION

SIZE

COVERAGE

C

$


7. PROGRAMMING LANGUAGES

Execution

Frequency

Portfolio Management & Risk Control

Research

Python

R

C ++

Java



QUESTION & ANSWER SESSION

®

THANK YOU


quant trading 101 nitish maini - amazon web servicescom.estimize.public.s3.amazonaws.com/l2q... ·...

Documents