Rishi K. Narang
Inside the Black Box (eBook, PDF)
A Simple Guide to Quantitative and High-Frequency Trading
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Rishi K. Narang
Inside the Black Box (eBook, PDF)
A Simple Guide to Quantitative and High-Frequency Trading
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New edition of book that demystifies quant and algo trading In this updated edition of his bestselling book, Rishi K Narang offers in a straightforward, nontechnical style--supplemented by real-world examples and informative anecdotes--a reliable resource takes you on a detailed tour through the black box. He skillfully sheds light upon the work that quants do, lifting the veil of mystery around quantitative trading and allowing anyone interested in doing so to understand quants and their strategies. This new edition includes information on High Frequency Trading. * Offers an update on the…mehr
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New edition of book that demystifies quant and algo trading In this updated edition of his bestselling book, Rishi K Narang offers in a straightforward, nontechnical style--supplemented by real-world examples and informative anecdotes--a reliable resource takes you on a detailed tour through the black box. He skillfully sheds light upon the work that quants do, lifting the veil of mystery around quantitative trading and allowing anyone interested in doing so to understand quants and their strategies. This new edition includes information on High Frequency Trading. * Offers an update on the bestselling book for explaining in non-mathematical terms what quant and algo trading are and how they work * Provides key information for investors to evaluate the best hedge fund investments * Explains how quant strategies fit into a portfolio, why they are valuable, and how to evaluate a quant manager This new edition of Inside the Black Box explains quant investing without the jargon and goes a long way toward educating investment professionals.
Produktdetails
- Produktdetails
- Verlag: John Wiley & Sons
- Seitenzahl: 336
- Erscheinungstermin: 1. März 2013
- Englisch
- ISBN-13: 9781118420591
- Artikelnr.: 37759346
- Verlag: John Wiley & Sons
- Seitenzahl: 336
- Erscheinungstermin: 1. März 2013
- Englisch
- ISBN-13: 9781118420591
- Artikelnr.: 37759346
rishi k narang is the Founding Principal of T2AM LLC, which invests in quantitative strategies. He has been involved in the hedge fund industry variously as an investor in and practitioner of quantitative trading strategies since 1996. When he isn't working, Rishi enjoys playing his guitar, writing essays and poems, making pencil sketches, arguing with people, playing tennis, doing yoga, and hiking. Rishi completed his undergraduate degree in economics at the University of California at Berkeley. He lives in Los Angeles with his wife, Dr. Carolyn Wong, and their son, Solomon.
Foreword Preface to the Second Edition Acknowledgments Part I: The Quant Universe Chapter 1: Why Does Quant Trading Matter? The Benefit of Deep Thought The Measurement and Mis-measurement of Risk Disciplined Implementation Summary Notes Chapter 2: An Introduction to Quantitative Trading What is a Quant? What is the Typical Structure of a Quantitative Trading System? Summary Notes Part II: Inside the Black Box Chapter 3: Alpha Models: How Quants Make Money Types of Alpha Models: Theory Driven and Data Driven Theory-Driven Alpha Models Data-Driven Alpha Models Implementing the Strategies Blending Alpha Models Summary Notes Chapter 4: Risk Models Limiting the Amount of Risk Limiting the Types of Risk Summary Notes Chapter 5: Transaction Cost Models Defining Transaction Costs Types of Transaction Cost Models Summary Notes Chapter 6: Portfolio Construction Models Rule-Based Portfolio Construction Models Portfolio Optimizers Output of Portfolio Construction Models How Quants Choose a Portfolio Construction Model Summary Notes Chapter 7: Execution Order Execution Algorithms Trading Infrastructure Summary Notes Chapter 8: Data The Importance of Data Types of Data Sources of Data Cleaning Data Storing Data Summary Notes Chapter 9: Research Blueprint for Research: The Scientific Method Idea Generation Testing Summary Notes Part III: A Practical Guide for Investors in Quantitative Strategies Chapter 10: Risks Inherent to Quant Strategies Model Risk Regime Change Risk Exogenous Shock Risk Contagion, or Common Investor, Risk How Quants Monitor Risk Summary Notes Chapter 11: Criticisms of Quant Trading Trading Is an Art, Not a Science Quants Cause More Market Volatility by Underestimating Risk Quants Cannot Handle Unusual Events or Rapid Changes in Market Conditions Quants Are All the Same Only a Few Large Quants Can Thrive in the Long Run Quants Are Guilty of Data Mining Summary Notes Chapter 12: Evaluating Quants and Quant Strategies Gathering Information Evaluating a Quantitative Trading Strategy Evaluating the Acumen of Quantitative Traders The Edge Evaluating Integrity How Quants Fit into a Portfolio Summary Notes Part IV: High Speed and High Frequency Trading Chapter 13: An Introduction to High Speed and High Frequency Trading* Notes Chapter 14: High Speed Trading Why Speed Matters Sources of Latency Summary Notes Chapter 15: High Frequency Trading Contractual Market Making Non-Contractual Market Making Arbitrage Fast Alpha HFT Risk Management and Portfolio Construction Summary Notes Chapter 16: Controversy Regarding High Frequency Trading Does HFT Create Unfair Competition? Does HFT Lead to Front-running or Market Manipulation? Does HFT Lead to Greater Volatility or Structural Instability? Does HFT Lack Social Value? Regulatory Considerations Summary Notes Chapter 17: Looking to the Future of Quant Trading About the Author Index
Preface to the Second Edition xiii Acknowledgments xvii Part ONE The Quant
Universe Chapter 1 Why Does Quant Trading Matter? 3 The Benefit of Deep
Thought 8 The Measurement and Mismeasurement of Risk 9 Disciplined
Implementation 10 Summary 11 Notes 11 Chapter 2 An Introduction to
Quantitative Trading 13 What Is a Quant? 14 What Is the Typical Structure
of a Quantitative Trading System? 16 Summary 19 Notes 20 Part two Inside
the Black Box Chapter 3 Alpha Models: How Quants Make Money 23 Types of
Alpha Models: Theory-Driven and Data-Driven 24 Theory-Driven Alpha Models
26 Data-Driven Alpha Models 42 Implementing the Strategies 45 Blending
Alpha Models 56 Summary 62 Notes 64 Chapter 4 Risk Models 67 Limiting the
Amount of Risk 69 Limiting the Types of Risk 72 Summary 76 Notes 78 Chapter
5 Transaction Cost Models 79 Defining Transaction Costs 80 Types of
Transaction Cost Models 85 Summary 90 Note 91 Chapter 6 Portfolio
Construction Models 93 Rule-Based Portfolio Construction Models 94
Portfolio Optimizers 98 Output of Portfolio Construction Models 112 How
Quants Choose a Portfolio Construction Model 113 Summary 113 Notes 115
Chapter 7 Execution 117 Order Execution Algorithms 119 Trading
Infrastructure 128 Summary 130 Notes 131 Chapter 8 Data 133 The Importance
of Data 133 Types of Data 135 Sources of Data 137 Cleaning Data 139 Storing
Data 144 Summary 145 Notes 146 Chapter 9 Research 147 Blueprint for
Research: The Scientific Method 147 Idea Generation 149 Testing 151 Summary
170 Note 171 Part three A Practical Guide for Investors in Quantitative
Strategies Chapter 10 Risks Inherent to Quant Strategies 175 Model Risk 176
Regime Change Risk 180 Exogenous Shock Risk 184 Contagion, or Common
Investor, Risk 186 How Quants Monitor Risk 193 Summary 195 Notes 195
Chapter 11 Criticisms of Quant Trading 197 Trading Is an Art, Not a Science
197 Quants Cause More Market Volatility by Underestimating Risk 199 Quants
Cannot Handle Unusual Events or Rapid Changes in Market Conditions 204
Quants Are All the Same 206 Only a Few Large Quants Can Thrive in the Long
Run 207 Quants Are Guilty of Data Mining 210 Summary 213 Notes 213 Chapter
12 Evaluating Quants and Quant Strategies 215 Gathering Information 216
Evaluating a Quantitative Trading Strategy 218 Evaluating the Acumen of
Quantitative Traders 221 The Edge 223 Evaluating Integrity 227 How Quants
Fit into a Portfolio 229 Summary 231 Note 233 Part four High-Speed and
High-Frequency Trading Chapter 13 An Introduction to High-Speed and
High-Frequency Trading* 237 Notes 241 Chapter 14 High-Speed Trading 243 Why
Speed Matters 244 Sources of Latency 252 Summary 262 Notes 263 Chapter 15
High-Frequency Trading 265 Contractual Market Making 265 Noncontractual
Market Making 269 Arbitrage 271 Fast Alpha 273 HFT Risk Management and
Portfolio Construction 274 Summary 277 Note 277 Chapter 16 Controversy
Regarding High-Frequency Trading 279 Does HFT Create Unfair Competition?
280 Does HFT Lead to Front-Running or Market Manipulation? 283 Does HFT
Lead to Greater Volatility or Structural Instability? 289 Does HFT Lack
Social Value? 296 Regulatory Considerations 297 Summary 299 Notes 300
Chapter 17 Looking to the Future of Quant Trading 303 About the Author 307
Index 309
Universe Chapter 1 Why Does Quant Trading Matter? 3 The Benefit of Deep
Thought 8 The Measurement and Mismeasurement of Risk 9 Disciplined
Implementation 10 Summary 11 Notes 11 Chapter 2 An Introduction to
Quantitative Trading 13 What Is a Quant? 14 What Is the Typical Structure
of a Quantitative Trading System? 16 Summary 19 Notes 20 Part two Inside
the Black Box Chapter 3 Alpha Models: How Quants Make Money 23 Types of
Alpha Models: Theory-Driven and Data-Driven 24 Theory-Driven Alpha Models
26 Data-Driven Alpha Models 42 Implementing the Strategies 45 Blending
Alpha Models 56 Summary 62 Notes 64 Chapter 4 Risk Models 67 Limiting the
Amount of Risk 69 Limiting the Types of Risk 72 Summary 76 Notes 78 Chapter
5 Transaction Cost Models 79 Defining Transaction Costs 80 Types of
Transaction Cost Models 85 Summary 90 Note 91 Chapter 6 Portfolio
Construction Models 93 Rule-Based Portfolio Construction Models 94
Portfolio Optimizers 98 Output of Portfolio Construction Models 112 How
Quants Choose a Portfolio Construction Model 113 Summary 113 Notes 115
Chapter 7 Execution 117 Order Execution Algorithms 119 Trading
Infrastructure 128 Summary 130 Notes 131 Chapter 8 Data 133 The Importance
of Data 133 Types of Data 135 Sources of Data 137 Cleaning Data 139 Storing
Data 144 Summary 145 Notes 146 Chapter 9 Research 147 Blueprint for
Research: The Scientific Method 147 Idea Generation 149 Testing 151 Summary
170 Note 171 Part three A Practical Guide for Investors in Quantitative
Strategies Chapter 10 Risks Inherent to Quant Strategies 175 Model Risk 176
Regime Change Risk 180 Exogenous Shock Risk 184 Contagion, or Common
Investor, Risk 186 How Quants Monitor Risk 193 Summary 195 Notes 195
Chapter 11 Criticisms of Quant Trading 197 Trading Is an Art, Not a Science
197 Quants Cause More Market Volatility by Underestimating Risk 199 Quants
Cannot Handle Unusual Events or Rapid Changes in Market Conditions 204
Quants Are All the Same 206 Only a Few Large Quants Can Thrive in the Long
Run 207 Quants Are Guilty of Data Mining 210 Summary 213 Notes 213 Chapter
12 Evaluating Quants and Quant Strategies 215 Gathering Information 216
Evaluating a Quantitative Trading Strategy 218 Evaluating the Acumen of
Quantitative Traders 221 The Edge 223 Evaluating Integrity 227 How Quants
Fit into a Portfolio 229 Summary 231 Note 233 Part four High-Speed and
High-Frequency Trading Chapter 13 An Introduction to High-Speed and
High-Frequency Trading* 237 Notes 241 Chapter 14 High-Speed Trading 243 Why
Speed Matters 244 Sources of Latency 252 Summary 262 Notes 263 Chapter 15
High-Frequency Trading 265 Contractual Market Making 265 Noncontractual
Market Making 269 Arbitrage 271 Fast Alpha 273 HFT Risk Management and
Portfolio Construction 274 Summary 277 Note 277 Chapter 16 Controversy
Regarding High-Frequency Trading 279 Does HFT Create Unfair Competition?
280 Does HFT Lead to Front-Running or Market Manipulation? 283 Does HFT
Lead to Greater Volatility or Structural Instability? 289 Does HFT Lack
Social Value? 296 Regulatory Considerations 297 Summary 299 Notes 300
Chapter 17 Looking to the Future of Quant Trading 303 About the Author 307
Index 309
Foreword Preface to the Second Edition Acknowledgments Part I: The Quant Universe Chapter 1: Why Does Quant Trading Matter? The Benefit of Deep Thought The Measurement and Mis-measurement of Risk Disciplined Implementation Summary Notes Chapter 2: An Introduction to Quantitative Trading What is a Quant? What is the Typical Structure of a Quantitative Trading System? Summary Notes Part II: Inside the Black Box Chapter 3: Alpha Models: How Quants Make Money Types of Alpha Models: Theory Driven and Data Driven Theory-Driven Alpha Models Data-Driven Alpha Models Implementing the Strategies Blending Alpha Models Summary Notes Chapter 4: Risk Models Limiting the Amount of Risk Limiting the Types of Risk Summary Notes Chapter 5: Transaction Cost Models Defining Transaction Costs Types of Transaction Cost Models Summary Notes Chapter 6: Portfolio Construction Models Rule-Based Portfolio Construction Models Portfolio Optimizers Output of Portfolio Construction Models How Quants Choose a Portfolio Construction Model Summary Notes Chapter 7: Execution Order Execution Algorithms Trading Infrastructure Summary Notes Chapter 8: Data The Importance of Data Types of Data Sources of Data Cleaning Data Storing Data Summary Notes Chapter 9: Research Blueprint for Research: The Scientific Method Idea Generation Testing Summary Notes Part III: A Practical Guide for Investors in Quantitative Strategies Chapter 10: Risks Inherent to Quant Strategies Model Risk Regime Change Risk Exogenous Shock Risk Contagion, or Common Investor, Risk How Quants Monitor Risk Summary Notes Chapter 11: Criticisms of Quant Trading Trading Is an Art, Not a Science Quants Cause More Market Volatility by Underestimating Risk Quants Cannot Handle Unusual Events or Rapid Changes in Market Conditions Quants Are All the Same Only a Few Large Quants Can Thrive in the Long Run Quants Are Guilty of Data Mining Summary Notes Chapter 12: Evaluating Quants and Quant Strategies Gathering Information Evaluating a Quantitative Trading Strategy Evaluating the Acumen of Quantitative Traders The Edge Evaluating Integrity How Quants Fit into a Portfolio Summary Notes Part IV: High Speed and High Frequency Trading Chapter 13: An Introduction to High Speed and High Frequency Trading* Notes Chapter 14: High Speed Trading Why Speed Matters Sources of Latency Summary Notes Chapter 15: High Frequency Trading Contractual Market Making Non-Contractual Market Making Arbitrage Fast Alpha HFT Risk Management and Portfolio Construction Summary Notes Chapter 16: Controversy Regarding High Frequency Trading Does HFT Create Unfair Competition? Does HFT Lead to Front-running or Market Manipulation? Does HFT Lead to Greater Volatility or Structural Instability? Does HFT Lack Social Value? Regulatory Considerations Summary Notes Chapter 17: Looking to the Future of Quant Trading About the Author Index
Preface to the Second Edition xiii Acknowledgments xvii Part ONE The Quant
Universe Chapter 1 Why Does Quant Trading Matter? 3 The Benefit of Deep
Thought 8 The Measurement and Mismeasurement of Risk 9 Disciplined
Implementation 10 Summary 11 Notes 11 Chapter 2 An Introduction to
Quantitative Trading 13 What Is a Quant? 14 What Is the Typical Structure
of a Quantitative Trading System? 16 Summary 19 Notes 20 Part two Inside
the Black Box Chapter 3 Alpha Models: How Quants Make Money 23 Types of
Alpha Models: Theory-Driven and Data-Driven 24 Theory-Driven Alpha Models
26 Data-Driven Alpha Models 42 Implementing the Strategies 45 Blending
Alpha Models 56 Summary 62 Notes 64 Chapter 4 Risk Models 67 Limiting the
Amount of Risk 69 Limiting the Types of Risk 72 Summary 76 Notes 78 Chapter
5 Transaction Cost Models 79 Defining Transaction Costs 80 Types of
Transaction Cost Models 85 Summary 90 Note 91 Chapter 6 Portfolio
Construction Models 93 Rule-Based Portfolio Construction Models 94
Portfolio Optimizers 98 Output of Portfolio Construction Models 112 How
Quants Choose a Portfolio Construction Model 113 Summary 113 Notes 115
Chapter 7 Execution 117 Order Execution Algorithms 119 Trading
Infrastructure 128 Summary 130 Notes 131 Chapter 8 Data 133 The Importance
of Data 133 Types of Data 135 Sources of Data 137 Cleaning Data 139 Storing
Data 144 Summary 145 Notes 146 Chapter 9 Research 147 Blueprint for
Research: The Scientific Method 147 Idea Generation 149 Testing 151 Summary
170 Note 171 Part three A Practical Guide for Investors in Quantitative
Strategies Chapter 10 Risks Inherent to Quant Strategies 175 Model Risk 176
Regime Change Risk 180 Exogenous Shock Risk 184 Contagion, or Common
Investor, Risk 186 How Quants Monitor Risk 193 Summary 195 Notes 195
Chapter 11 Criticisms of Quant Trading 197 Trading Is an Art, Not a Science
197 Quants Cause More Market Volatility by Underestimating Risk 199 Quants
Cannot Handle Unusual Events or Rapid Changes in Market Conditions 204
Quants Are All the Same 206 Only a Few Large Quants Can Thrive in the Long
Run 207 Quants Are Guilty of Data Mining 210 Summary 213 Notes 213 Chapter
12 Evaluating Quants and Quant Strategies 215 Gathering Information 216
Evaluating a Quantitative Trading Strategy 218 Evaluating the Acumen of
Quantitative Traders 221 The Edge 223 Evaluating Integrity 227 How Quants
Fit into a Portfolio 229 Summary 231 Note 233 Part four High-Speed and
High-Frequency Trading Chapter 13 An Introduction to High-Speed and
High-Frequency Trading* 237 Notes 241 Chapter 14 High-Speed Trading 243 Why
Speed Matters 244 Sources of Latency 252 Summary 262 Notes 263 Chapter 15
High-Frequency Trading 265 Contractual Market Making 265 Noncontractual
Market Making 269 Arbitrage 271 Fast Alpha 273 HFT Risk Management and
Portfolio Construction 274 Summary 277 Note 277 Chapter 16 Controversy
Regarding High-Frequency Trading 279 Does HFT Create Unfair Competition?
280 Does HFT Lead to Front-Running or Market Manipulation? 283 Does HFT
Lead to Greater Volatility or Structural Instability? 289 Does HFT Lack
Social Value? 296 Regulatory Considerations 297 Summary 299 Notes 300
Chapter 17 Looking to the Future of Quant Trading 303 About the Author 307
Index 309
Universe Chapter 1 Why Does Quant Trading Matter? 3 The Benefit of Deep
Thought 8 The Measurement and Mismeasurement of Risk 9 Disciplined
Implementation 10 Summary 11 Notes 11 Chapter 2 An Introduction to
Quantitative Trading 13 What Is a Quant? 14 What Is the Typical Structure
of a Quantitative Trading System? 16 Summary 19 Notes 20 Part two Inside
the Black Box Chapter 3 Alpha Models: How Quants Make Money 23 Types of
Alpha Models: Theory-Driven and Data-Driven 24 Theory-Driven Alpha Models
26 Data-Driven Alpha Models 42 Implementing the Strategies 45 Blending
Alpha Models 56 Summary 62 Notes 64 Chapter 4 Risk Models 67 Limiting the
Amount of Risk 69 Limiting the Types of Risk 72 Summary 76 Notes 78 Chapter
5 Transaction Cost Models 79 Defining Transaction Costs 80 Types of
Transaction Cost Models 85 Summary 90 Note 91 Chapter 6 Portfolio
Construction Models 93 Rule-Based Portfolio Construction Models 94
Portfolio Optimizers 98 Output of Portfolio Construction Models 112 How
Quants Choose a Portfolio Construction Model 113 Summary 113 Notes 115
Chapter 7 Execution 117 Order Execution Algorithms 119 Trading
Infrastructure 128 Summary 130 Notes 131 Chapter 8 Data 133 The Importance
of Data 133 Types of Data 135 Sources of Data 137 Cleaning Data 139 Storing
Data 144 Summary 145 Notes 146 Chapter 9 Research 147 Blueprint for
Research: The Scientific Method 147 Idea Generation 149 Testing 151 Summary
170 Note 171 Part three A Practical Guide for Investors in Quantitative
Strategies Chapter 10 Risks Inherent to Quant Strategies 175 Model Risk 176
Regime Change Risk 180 Exogenous Shock Risk 184 Contagion, or Common
Investor, Risk 186 How Quants Monitor Risk 193 Summary 195 Notes 195
Chapter 11 Criticisms of Quant Trading 197 Trading Is an Art, Not a Science
197 Quants Cause More Market Volatility by Underestimating Risk 199 Quants
Cannot Handle Unusual Events or Rapid Changes in Market Conditions 204
Quants Are All the Same 206 Only a Few Large Quants Can Thrive in the Long
Run 207 Quants Are Guilty of Data Mining 210 Summary 213 Notes 213 Chapter
12 Evaluating Quants and Quant Strategies 215 Gathering Information 216
Evaluating a Quantitative Trading Strategy 218 Evaluating the Acumen of
Quantitative Traders 221 The Edge 223 Evaluating Integrity 227 How Quants
Fit into a Portfolio 229 Summary 231 Note 233 Part four High-Speed and
High-Frequency Trading Chapter 13 An Introduction to High-Speed and
High-Frequency Trading* 237 Notes 241 Chapter 14 High-Speed Trading 243 Why
Speed Matters 244 Sources of Latency 252 Summary 262 Notes 263 Chapter 15
High-Frequency Trading 265 Contractual Market Making 265 Noncontractual
Market Making 269 Arbitrage 271 Fast Alpha 273 HFT Risk Management and
Portfolio Construction 274 Summary 277 Note 277 Chapter 16 Controversy
Regarding High-Frequency Trading 279 Does HFT Create Unfair Competition?
280 Does HFT Lead to Front-Running or Market Manipulation? 283 Does HFT
Lead to Greater Volatility or Structural Instability? 289 Does HFT Lack
Social Value? 296 Regulatory Considerations 297 Summary 299 Notes 300
Chapter 17 Looking to the Future of Quant Trading 303 About the Author 307
Index 309