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You are here: - Trading Risk -

Trading Risk How to Make Risk Management Trade-Offs Work in Your Favor By: Kenneth L. Grant Normal price: 47.5 Our price: 33.25 + postage Bargain: save £14.25 ! Product code: 20066 ISBN: 0471650919 304 pages Format: Hb Published by: John Wiley & Sons, 2004, 1st edition There are no reviews available for this book Description of Trading Risk Revolutionary techniques that traders can implement to improve profits and avoid losses No trader, professional or individual, can afford not to have a solid risk management program integrated into his or her trading system. But finding a precise mathematical model to replace subjective decision-making processes is a challenge. Traditionally, risk management has focused solely on loss avoidance, but in Trading Risk, hedge fund risk manager Kenneth Grant presents some-thing completely new - how to manage a portfolio to minimize risk and increase profits by putting more capital at risk. Trading Risk details a risk management program that can help both money managers and individual traders evaluate which elements in a portfolio are working efficiently and which aren’t. By illustrating an extremely simple set of statistical and arithmetic tools this book can help readers enhance their performance in many financial markets. Trading Risk - Chapter headings Preface Acknowledgments 1. The Risk Management Investment 2. Setting Performance Objectives Optimal Target Return Nominal Target Return Stop-Out Level The Beach 3. Understanding the Profit/Loss Patterns over Time And Now to Statistics, but First a Word (or More) about Time Series 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 Losing Days Drawdown Correlations Putting It All Together 4. The Risk Components of an Individual Portfolio 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 5. Setting Appropriate Exposure Levels (Rule 1) Determining the Appropriate Ranges of Exposure Method 1: Inverted Sharpe Ratio Method 2: Managing Volatility as a Percentage of Trading Capital Drawdowns and Netting Risk Asymmetric Payoff Function 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 7. The Risk Components of an Individual Trade 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 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 Authobiography of Kenneth L. Grant Kenneth L. Grant (New York, NY) is Managing Partner and CIO of Exis Capital, a NYC-based multi-strategy hedge fund. Prior to this, Grant worked as the head of risk management for both Tudor Investments and the Chicago Mercantile Exchange. He was also the chief investment strategist for SAC Capital Advisors, one of the largest hedge funds in the world with over $4 billion under management. Grant holds a Bachelor of Science in Economics and Mathematics from the University of Wisconsin, an MA in economics from Columbia University, and an MBA from the University of Chicago Graduate School of Business.