- Hardcover: 350 pages
- Publisher: AMACOM; 1st edition (July 9, 2003)
- Language: English
- ISBN-10: 0814407242
- ISBN-13: 978-0814407240
- Product Dimensions: 10.4 x 7.2 x 1.3 inches
- Shipping Weight: 1.6 pounds
- Average Customer Review: 21 customer reviews
- Amazon Best Sellers Rank: #955,178 in Books (See Top 100 in Books)
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Optimal Trading Strategies: Quantitative Approaches for Managing Market Impact and Trading Risk Hardcover – July 9, 2003
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“…brilliantly fill[s] a significant gap in the literature and its applications in real-life trading…provides an accessible introduction to the science of trading…a thorough quantitative handling for those looking for the highest level of detail.— www.seekingalpha.com
"The decisions that investment professionals and fund managers make have a direct impact on investor return. Unfortunately, the best implementation methodologies are not widely disseminated throughout the professional community, compromising the best interests of funds, their managers, and ultimately the individual investor. But now there is a strategy that lets professionals make better decisions. This valuable reference answers crucial questions such as:
* How do I compare strategies?
* Should I trade aggressively or passively?
* How do I estimate trading costs, ""slice"" an order, and measure performance?
and dozens more. Optimal Trading Strategies is the first book to give professionals the methodology and framework they need to make educated implementation decisions based on the objectives and goals of the funds they manage and the clients they serve."
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Audience for this book are the people on the trading desks of mutual funds and hedge funds who execute large-size orders for a living. This book is NOT for small day traders, as there's nothing about making a profit from day trading.
Total waste of money .
OTS assists investors and fund managers in addressing the fundamental problem known as the "Traders dilemma". Trading too aggressively increases costs, while trading too passively increases exposure to risk. This formula calculates the minimum cost [ç] of a trade [x] while ensuring that the risk of the trade [R(x)] will be within an acceptable level of risk [R*] for an investor.
This is a great concept, and OTS makes it powerful with it's collection of precision tools to calculate both cost and risk. Costs are unbundled into nine distinct components. Thorough mathematical formulas are provided for analyzing each component. A key example is the 3 models in chapter 9 designed to calculate market impact of a potential trade. The 3 different approaches help clarify the elusive effects that imbalance, volatility, trading style, and liquidity have on market impact.
There is also a practical discussion of why traders select the popular Volume Weighted Price Strategy (VWAP). It is accompanies by the most complete mathematical analysis of VWAP I've ever seen. Examples with solutions are even included for practice using these newly acquired tools.
The authors of OTS utilize an unprecedented combination of mathematical theory and real world experience to create a powerful framework that focuses investors on maintaining equilibrium between acceptable levels of cost and risk. No professional investors toolkit will be complete without it. Their new dilemma is where to pick up a copy of OTS.
The authors brilliantly fill a major gap in the literature and its real-world applications. This book provides both an accessible introduction to the science of trading, and a rigorous quantitative treatment.
So far, most of the investment science literature assumes trades to be instantaneous, cost-free and divorced from returns. But to the active trader, portfolio manager, plan sponsor or student of finance, these assumptions can mean the difference between a winning and a losing investment.
The authors present a methodology that will allow the uninitiated to qualitatively distinguish between trading strategies and gauge their brokers' quality of trade execution.
The more technical reader will be provided with techniques necessary for the construction of customized trading strategies, tailored to his particular investment objectives, be they portfolio rebalancing, statistical arbitrage, swing trading, etc...
If you're directly or indirectly involved in the trading of securities, this book is not only an invaluable reference, it's a one of a kind must-read!
It deals with a fundamental, but all-to-often forgotten, component of the investment process : the science of trading.
The authors not only give an accessible and comprehensive introduction to the science of trading, but they also offer a rigorous quantitative treatment of the subject.
The book provides the non-quantitative and un-initiated with the necessary methodology to gauge the quality of trade execution provided by their brokers.
It also allows the more technically inclined to implement optimal trading strategies, to suit their particular needs, whether they be stat-arb, portfolio rebalancing, etc...
So far, most of the literature in quantitative finance focuses strictly on the creation of optimal portfolios, ignores liquidity issues and assumes the trading of securities to be instantaneous, and without impact on returns.
But wether you're an active trader, portfolio manager, plan sponsor, risk analyst or student of quantitative finance, you cannot afford to ignore liquidity issues and trading costs.
This book is a must-have reference, that will be of valuable use!