July 19, New York
WORKSHOP 1: Algorithmic trading and quantitative strategies
8:30 Registration and breakfast
9:00 Multi-period dynamic portfolio analysis: The trade-offs between alpha decay, risk, and trading costs
The traditional view of portfolio construction, risk analysis, and execution holds that these three functions of money management are separable. Portfolios are constructed without incorporating the costs of execution, and execution is conducted without considering portfolio level risk. With the explosive growth of systematic trading, several methodologies have been proposed for unifying and improving traditional money management functions. In this talk we present a multi-period portfolio optimization model with market impact costs, and alpha decay.
Petter Kolm, PhD, Courant Institute of Mathematical Sciences, NYU and the HEIMDALL GROUP
10:30 Morning coffee break
11:00 Portfolio optimization via bayesian dynamic models
We show that any inter-temporal portfolio optimization problem has a natural Bayesian dynamic model associated to it, and discuss how new methods for estimation and simulation in Bayesian dynamic models can be brought to bear on realistic portfolio optimization problems.
Gordon Ritter, PhD , HIGHBRIDGE CAPITAL MANAGEMENT
Joint work with Petter Kolm, PhD
12:30 Lunch
1:30 Micro trading in algorithmic trading systems
The problem of optimal execution has been investigated heavily over the years, since Almgren and Chriss's seminal paper. Many papers have dealt with this problem in the context of single stocks, baskets, under different impact models, and a variety of other assumptions. All these solutions create a continues static or dynamic trajectory that one suppose to follow. In this talk we will examine various problems associated with implementing this trajectory on the micro level. We will discuss topics like short terms signals and their usefulness, adverse selection of limit orders, limit order submission strategies, and more.
Eran Fishler, PhD, Chief Operating Officer, PRAGMA SECURITIES
3:00 Afternoon coffee break
3:30 The triple penance rule
Under standard portfolio theory assumptions, we show that it takes three times longer to recover from the maximum drawdown than the time it took to produce it, with the same confidence level ("triple penance rule").
We generalize this framework to the case of first-order auto-correlated investment outcomes, and conclude that ignoring the effect of serial correlation leads to a gross underestimation of the downside potential of hedge fund strategies, by as much as 70%. We also estimate that some hedge funds may be firing more than three times the number of skillful portfolio managers, compared to the number that they were willing to accept, as a result of evaluating their performance through traditional metrics, such as the Sharpe ratio.
Marcos López de Prado, Head of Quantitative Trading, HESS ENERGY TRADING COMPANY
5:00 End of workshop
Speakers' biographies:
Petter Kolm is the Director of the Mathematics in Finance Masters Program and Clinical Associate Professor at the Courant Institute of Mathematical Sciences, New York University and the Principal of the Heimdall Group, LLC. Previously, Petter worked in the Quantitative Strategies Group at Goldman Sachs Asset Management where his responsibilities included researching and developing new quantitative investment strategies for the group's hedge fund. Petter coauthored the books Financial Modeling of the Equity Market: From CAPM to Cointegration (Wiley, 2006), Trends in Quantitative Finance (CFA Research Institute, 2006), Robust Portfolio Management and Optimization (Wiley, 2007), and Quantitative Equity Investing: Techniques and Strategies (Wiley, 2010). He holds a Ph.D. in mathematics from Yale, an M.Phil. in applied mathematics from Royal Institute of Technology, and an M.S. in mathematics from ETH Zurich.
Petter is a member of the editorial boards of the International Journal of Bonds and Currency Derivatives (IJBCD), International Journal of Portfolio Analysis and Management (IJPAM), Journal of Investment Strategies (JOIS), Journal of Portfolio Management (JPM), and the board of directors of the International Association of Financial Engineers (IAFE). As a consultant and expert witness, he has provided his services in areas such as algorithmic and quantitative trading strategies, econometrics, forecasting models, portfolio construction methodologies incorporating transaction costs, and risk management procedures.
Email: petter.kolm@nyu.edu
Web: http://www.cims.nyu.edu/~kolm
Dr. Ritter is a Vice President at Highbridge Capital Management, where he has been since 2008. Prior to that, he completed his PhD at Harvard University, where he published nine articles in several fields including quantum field theory, quantum computation, and abstract algebra. He is a recipient of Harvard's award for excellence in teaching. He also holds an Honors BA from the University of Chicago in Mathematics.
Eran Fishler joined Pragma in August of 2007. He leads the research and technology teams in the day-to-day operations of the company, as well as in developing new offerings to suit the current and future needs of traders. Previously, Eran worked at Hite Capital Management, where he developed an innovative research and trading platform for equity strategies and managed a long-short, market neutral, quantitative equity strategy. Eran holds a Ph.D. in Electrical Engineering from Israel's Tel Aviv University, and an MBA from the Stern School of Business at New York University. He is currently an adjunct professor at Courant Institute for Advanced Mathematics (NYU) and at Columbia University. Eran is an expert in the field of parameter estimation and detection theory and has published over 40 technical papers in the area of statistical signal processing.
Marcos López de Prado is Head of Quantitative Trading & Research at Hess Energy Trading Company, the trading arm of Hess Corporation, a Fortune 100 company. Before that, Marcos was Head of Global Quantitative Research at Tudor Investment Corporation, where he also led High Frequency Futures Trading and several strategic initiatives. Marcos joined Tudor from PEAK6 Investments, where he was a Partner and ran the Statistical Arbitrage group at the Futures division. Prior to that, he was Head of Quantitative Equity Research at UBS Wealth Management, and a Portfolio Manager at Citadel Investment Group. In addition to his 15+ years of investment management experience, Marcos has received several academic appointments, including Postdoctoral Research Fellow of RCC at Harvard University, Visiting Scholar at Cornell University, and Research Affiliate at Lawrence Berkeley National Laboratory (U.S. Department of Energy's Office of Science). He holds a Ph.D. in Financial Economics (Summa cum Laude, 2003), a Sc.D. in Mathematical Finance (Summa cum Laude, 2011) from Complutense University, is a recipient of the National Award for Excellence in Academic Performance by the Government of Spain (National Valedictorian, Economics, 1998), and was admitted into American Mensa with a perfect test score.
Marcos is a scientific advisor to Enthought's Python projects (NumPy, SciPy), and a member of the editorial board of the Journal of Investment Strategies (Risk Journals). His research has resulted in three international patent applications, several papers listed among the most read in Finance (SSRN), publications in the Review of Financial Studies, Mathematical Finance, Journal of Risk, Journal of Portfolio Management, etc. His current Erdös number is 3, with a valence of 2.
