Monday, 20 March 2017

Quant quotes

Over 11 years of meeting hedge funds there were quite a few memorable meetings and characters. From the events of 2008 to meeting people like Lars Steffensen and attending the Bear Stearns ABS cap intro and education event in April 2008.

But one of the best interactions I had was over several meetings with the CEO of a well known quant fund who schooled me that 'words are important' after I asked a few vague but reaching questions. So I decided the next time I would write down what he said verbatim. So here are a few of his quotes from one cap intro conference:

On trend:
'Medium term trend... we dont see it as having a problem' (i.e. returns
havent eroded over time)

On their carry strategies:
'(we) see all these carry models as uncorrelated, but independently have
low Sharpe ratios, put them together and the portfolio Sharpe is higher'

On their equity mn strategy:
'cash equity market is not very liquid'

'the strategy has 3% stand alone vol, but only adds 10bps to the total
risk'

On Aug-07 quant flash crash:
'it was just a small cap liquidity crisis'

On risk management:
'stuff happens (referring to 1987) ...but you can forecast volatility
pretty well most of the time'

'forecasting correlation is not that hard' (see last point)

'the volatility that you choose (to run a strategy at) is pretty much
arbitrary' (see previous points)

'all of this (his risk management comments) has been on the basis that the
markets are Gaussian... markets are nearly normal(ly distributed)'

'if the correlation isnt what you think it was then you realise more risk'

'we dislike the bad more than we like the good'

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