By:
On:
In: Quant, Risk
With: 1,433 Comments

By Irene Aldridge Several decades back, managing investment risk was straightforward by today’s standards. A simple strategy of “don’t put all your eggs into the same basket” worked well: invest into many stocks with different businesses, the thinking went, and reap the rewards of positive returns in all market conditions. The key underlying premises of “multiple baskets” investing were two-fold: Stocks of companies in different industries rarely moved in tandem; and Most stocks were expected to rise in the long term. Today, neither of the two principles holds: Many companies and their stocks face an uncertain future, and lots of stocks sway together in responseRead More →

By:
On:
In: HFT
With: 1,671 Comments

High-frequency trading (HFT) uses quantitative investment computer programs to hold short-term positions in equities, options, futures, ETFs, currencies, and all other financial instruments that possess electronic trading capability. (Some securities, like Credit Default Swaps, for example, cannot be traded electronically, and are incompatible with investment algorithms.) Aiming to capture just a fraction of a penny per share or currency unit on every trade, high-frequency traders move in and out of such short-term positions several times each day. Fractions of a penny accumulate fast to produce significantly positive results at the end of every day. “High-frequency trading” became a buzzword in 2009, when Goldman Sachs accusedRead More →