# Implementation Shortfall One Objective, Many Algorithms

Save this PDF as:

Size: px
Start display at page:

## Transcription

2 But, with the arrival price benchmarking, if a trader or an algorithm executes trades in size quickly, the ensuing market impact is likely to result in average execution prices that are worse than the arrival price. On the other hand, if the algorithm/trader executes the trades slowly (to reduce market impact), the volatility of the stocks may still result in execution prices that are far from the arrival price. In short, a trader/algorithm s ability to achieve execution prices close to arrival prices depends on the size of the order, the liquidity available for the stock, and the volatility of the stock. 2 It is then appropriate to develop an algorithm that anticipates execution costs by looking at all these factors (order size, volume, volatility, and correlation). In fact, there are many such models that try to anticipate the cost of trading by factoring in these properties of trade-lists, including the ITG ACE (Agency Cost Estimator) model. However, the appeal of the VWAP benchmark in part lies in the fact that it does not require such cost predictions. VWAP vs. Arrival Price So how does arrival price based algorithms stack up against VWAP algorithms in execution? The following charts plot profit and loss (P&L) for VWAP benchmark (in VWAP algorithm-chart 1). It is apparent from the chart that the available liquidity (trade sizes/total volume) do not seem to have much impact on the algorithm s ability to meet VWAP The effect of liquidity on P&L Vs VWAP in VWAP algorithm A) 0-1% B) 1-5% C) 5-10% D) 10-25% E) 25-50% Trade size in % of volume P&L Vs VWAP in VWAP Algorithm Chart 1: VWAP- P&L vs. percentage of volume (Source: ITG) 2 In addition, stock correlations also have an impact on the difficulty of achieving arrival price, as later explained in the article.

4 VWAP Algorithm performance vs. IS Algorithm performance for Arrival Price benchmark 2 P&L in VWAP - P&L in IS Algorithm A) 0-1% B) 1-5% C) 5-10% D) 10-25% E) 25-50% Trade size in % of volume Chart 3: Comparison of P&L (vs. Arrival Price) in VWAP algorithm & IS Algorithm plotted against percentage of volume. (Source: ITG) The chart explains that the performance in VWAP Algorithm is similar to the performance in Implementation Shortfall algorithm. One should also note that the demanded liquidity impacts both algorithms in a similar fashion. This explains in part why VWAP algorithms have remained so popular: they are easy to measure, easy to execute, and can produce similar results on average. However, this does not take into account the potential hidden costs of using a VWAP algorithm for implementation shortfall, as discussed below. Problems with VWAP algorithms for Implementation Shortfall 1) Potentially high opportunity costs Traders and Portfolio Managers care about average costs vs. arrival price, and they also care about the consistency of the cost. A passive algorithm such as VWAP can ensure a good average price vs. arrival price, but it cannot ensure consistency. To illustrate that, one can plot the standard deviation of the P&L vs. arrival price of trades against the percent of volume for VWAP and implementation shortfall algorithms.

12 horizon and thus reduces the market impact while lowering the opportunity cost. For a risk-controlled list, traders can also hedge with liquid instruments, (as long as the algorithms they use permit them to specify explicit risk control objectives). Traders may also prefer specifying explicit risk control objectives if they favor an intuitive risk control approach over automatic optimizations. Finally, anonymous block liquidity sources such as POSIT can be extremely helpful in reducing implementation shortfall. The use of risk control may be helpful while accessing such liquidity, particularly in the trading of twosided lists. Notes: 1) The data displayed in the above charts are random samples from the database of ITG execution algorithms. Appendix 1. If a trade list is single-sided, then even though a stock may reduce the risk of the overall list in terms of percentage, it will always increase the risk in terms of dollars. We can illustrate this with a two-stock example, which can further be generalized for more than two stocks: Let us assume that in most cases, a correlation between two stocks is positive. Assume we have stocks S1 and S2 that have very low correlation of ρ12. The volatility of S1 and S2 are σ1 and σ2. We have D1 dollars of S1 to buy and D2 dollars of S2 to buy. The total risk of the list would be (D1 σ1) 2 + (D2 σ2) D1 D2 σ1 σ2 ρ12 Even if ρ12 is very low, since it is always positive, reducing D2 or reducing D1 will always reduce the overall risk of the list. If S2 is a stock to be sold then we can write the risk as (D1 σ 1) 2 + (D2 σ 2) 2-2 D1 D2 σ1 σ2 ρ12 In this case reducing D2 can either reduce the risk or increase the risk depending on D1, D2, σ1, σ2 and ρ12. For example if ρ12 is very low then reducing the dollar amount of any stock will always reduce the total risk but if it is very high then reducing the dollar amount of one stock only may actually increase the overall risk.

13 The information contained herein has been taken from trade and statistical services and other sources we deem reliable but we do not represent that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed herein reflect our judgment at this date and are subject to change. All information, terms and pricing set forth here are indicative, based on among other things, market conditions at the time of this writing and are subject to change without notice. This report is for informational purposes and is neither an offer to sell nor a solicitation of an offer to buy any security or other financial instrument in any jurisdiction where such offer or solicitation would be illegal. No part of this report may be reproduced in any manner without permission. Past results are not necessarily indicative of future results. Futures trading is speculative and involves risk of substantial loss. 2005, ITG Inc. Member NASD, SIPC. All rights reserved "S&P 500 " is a registered trademark of McGraw-Hill Companies, Inc.

### Measuring and Interpreting the Performance of Broker Algorithms

Measuring and Interpreting the Performance of Broker Algorithms Ian Domowitz Managing Director ITG Inc. 380 Madison Ave. New York, NY 10017 212 588 4000 idomowitz@itginc.com Henry Yegerman Director ITG

### Cluster Analysis for Evaluating Trading Strategies 1

CONTRIBUTORS Jeff Bacidore Managing Director, Head of Algorithmic Trading, ITG, Inc. Jeff.Bacidore@itg.com +1.212.588.4327 Kathryn Berkow Quantitative Analyst, Algorithmic Trading, ITG, Inc. Kathryn.Berkow@itg.com

Algorithmic and advanced orders in SaxoTrader Summary This document describes the algorithmic and advanced orders types functionality in the new Trade Ticket in SaxoTrader. This functionality allows the

### BECS Pre-Trade Analytics. An Overview

BECS Pre-Trade Analytics An Overview January 2010 Citi s Pre-Trade Analytical Products and Services Citi has a long history of providing advanced analytical tools to our clients. Significant effort has

### Active Versus Passive Low-Volatility Investing

Active Versus Passive Low-Volatility Investing Introduction ISSUE 3 October 013 Danny Meidan, Ph.D. (561) 775.1100 Low-volatility equity investing has gained quite a lot of interest and assets over the

### The Cost of Algorithmic Trading: A First Look at Comparative Performance

The of Algorithmic Trading: A First Look at Comparative Performance Ian Domowitz Managing Director ITG Inc. 380 Madison Ave. New York, NY 10017 212 588 4000 idomowitz@itginc.com Henry Yegerman Director

### Execution Costs. Post-trade reporting. December 17, 2008 Robert Almgren / Encyclopedia of Quantitative Finance Execution Costs 1

December 17, 2008 Robert Almgren / Encyclopedia of Quantitative Finance Execution Costs 1 Execution Costs Execution costs are the difference in value between an ideal trade and what was actually done.

### The Need for Speed: It s Important, Even for VWAP Strategies

Market Insights The Need for Speed: It s Important, Even for VWAP Strategies November 201 by Phil Mackintosh CONTENTS Speed benefits passive investors too 2 Speed helps a market maker 3 Speed improves

### algorithmic & program trading services

algorithmic & program trading services Featuring the Abel/Noser Signature Algorithm Series Institutional Agency Execution and Trade Analytics algorithmic & program trading services * Abel/Noser has offered

Adaptive Arrival Price Julian Lorenz (ETH Zurich, Switzerland) Robert Almgren (Adjunct Professor, New York University) Algorithmic Trading 2008, London 07. 04. 2008 Outline Evolution of algorithmic trading

### An introduction to measuring trading costs - TCA

An introduction to measuring trading costs - TCA Ofir Gefen, Head of Research & Execution Consulting ITG Asia Pacific 2011 Investment Technology Group, Inc. All rights reserved. Not to be reproduced or

### Does trading at the Fix fix FX?

By: Michael DuCharme, CFA, Head of Foreign Exchange JUNE 2013 Does trading at the Fix fix FX? Foreign exchange transactions are significant components of millions of daily financial transactions, yet most

### FTS Real Time System Project: Portfolio Diversification Note: this project requires use of Excel s Solver

FTS Real Time System Project: Portfolio Diversification Note: this project requires use of Excel s Solver Question: How do you create a diversified stock portfolio? Advice given by most financial advisors

### Answers to Concepts in Review

Answers to Concepts in Review 1. A portfolio is simply a collection of investments assembled to meet a common investment goal. An efficient portfolio is a portfolio offering the highest expected return

### Concentrated Stock Overlay INCREMENTAL INCOME FROM CONCENTRATED WEALTH

Concentrated Stock Overlay INCREMENTAL INCOME FROM CONCENTRATED WEALTH INTRODUCING RAMPART CONCENTRATED STOCK OVERLAY STRATEGY When a portfolio includes a concentrated equity position, the risk created

### Frontiers in Best Execution : Perspectives for Investment Managers

Frontiers in Best Execution : Perspectives for Investment Managers The gremlins of portfolio implementation shortfalls have always haunted the halls of investment management. As part of their on-going

### Chapter 1 The Investment Setting

Chapter 1 he Investment Setting rue/false Questions F 1. In an efficient and informed capital market environment, those investments with the greatest return tend to have the greatest risk. Answer: rue

### Does Trading at the Fix fix FX?

By: Michael DuCharme, CFA MAY 2013 Does Trading at the Fix fix FX? Introduction Foreign exchange transactions are significant components of millions of daily financial transactions, yet most currency transactions

### Investing in Projected Russell 2000 Stock Additions: A Viable Investment Strategy or a Loser s Game?

May 2011 Investing in Projected Russell 2000 Stock Additions: Abstract Existing studies on the annual rebalancing of the Russell indexes utilize the actual additions and deletions of these indexes to draw

Pairs Trading Pairs trading refers to opposite positions in two different stocks or indices, that is, a long (bullish) position in one stock and another short (bearish) position in another stock. The objective

### FE570 Financial Markets and Trading. Stevens Institute of Technology

FE570 Financial Markets and Trading Lecture 13. Execution Strategies (Ref. Anatoly Schmidt CHAPTER 13 Execution Strategies) Steve Yang Stevens Institute of Technology 11/27/2012 Outline 1 Execution Strategies

### AMERICAN REGISTRY OF INTERNET NUMBERS INVESTMENT POLICY STATEMENT January 2014

AMERICAN REGISTRY OF INTERNET NUMBERS INVESTMENT POLICY STATEMENT January 2014 Introduction This statement of investment policy has been adopted by the Board of Trustees of the American Registry of Internet

### A Pared-Down Approach to Stock Picking. That is Market-Neutral and Results-Driven

A Pared-Down Approach to Stock Picking That is Market-Neutral and Results-Driven Q1 2011 A white paper discussing how this strategy of market-neutral approaches delivers on its promise 1 A Pared-Down Approach

### I.e., the return per dollar from investing in the shares from time 0 to time 1,

XVII. SECURITY PRICING AND SECURITY ANALYSIS IN AN EFFICIENT MARKET Consider the following somewhat simplified description of a typical analyst-investor's actions in making an investment decision. First,

### Transaction Cost Analysis and Best Execution

ATMonitor Commentary July 2011 Issue Transaction Cost Analysis and Best Execution 10 things you wanted to know about TCA but hesitated to ask Foreword This is not an academic paper on theoretical discussions

### HIGH FREQUENCY TRADING, ALGORITHMIC BUY-SIDE EXECUTION AND LINGUISTIC SYNTAX. Dan dibartolomeo Northfield Information Services 2011

HIGH FREQUENCY TRADING, ALGORITHMIC BUY-SIDE EXECUTION AND LINGUISTIC SYNTAX Dan dibartolomeo Northfield Information Services 2011 GOALS FOR THIS TALK Assert that buy-side investment organizations engage

### A Better Way to Trade Small Caps The Power of Volume Volatility in Algorithm Design

AUTHORS Benjamin Polidore Managing Director Head of Algorithmic Trading benjamin.polidore@itg.com Lin Jiang Assistant Vice President ITG Algorithms lin.jiang@itg.com Yichu Li Analyst ITG Algorithms yichu.li@itg.com

### Portfolio Strategy. Trading Less Competitive Markets is Costly

(212 ( Portfolio Strategy Trading Less Competitive Markets is Costly TRADING STRATEGY Market Commentary 13 August 2013 Key Points Despite complaints about US market structure, it remains among the cheapest

### Investing on hope? Small Cap and Growth Investing!

Investing on hope? Small Cap and Growth Investing! Aswath Damodaran Aswath Damodaran! 1! Who is a growth investor?! The Conventional definition: An investor who buys high price earnings ratio stocks or

### VANDERBILT AVENUE ASSET MANAGEMENT

SUMMARY CURRENCY-HEDGED INTERNATIONAL FIXED INCOME INVESTMENT In recent years, the management of risk in internationally diversified bond portfolios held by U.S. investors has been guided by the following

### Dual Listing of the SGX EURO STOXX 50 Index Futures in Singapore

September 2011 Dual Listing of the SGX EURO STOXX 50 Index Futures in Singapore Mr Tobias Hekster Managing Director, True Partner Education Ltd Senior Strategist, Algorithmic Training Group of Hong Kong

### Understanding Margins

Understanding Margins Frequently asked questions on margins as applicable for transactions on Cash and Derivatives segments of NSE and BSE Jointly published by National Stock Exchange of India Limited

### Effective downside risk management

Effective downside risk management Aymeric Forest, Fund Manager, Multi-Asset Investments November 2012 Since 2008, the desire to avoid significant portfolio losses has, more than ever, been at the front

### FINANCIAL ECONOMICS OPTION PRICING

OPTION PRICING Options are contingency contracts that specify payoffs if stock prices reach specified levels. A call option is the right to buy a stock at a specified price, X, called the strike price.

### Life Cycle Asset Allocation A Suitable Approach for Defined Contribution Pension Plans

Life Cycle Asset Allocation A Suitable Approach for Defined Contribution Pension Plans Challenges for defined contribution plans While Eastern Europe is a prominent example of the importance of defined

Exchange-Traded Funds Exchange Traded Funds (ETF s) are becoming popular investment vehicles for many investors. Most ETF s are cost effective, broad market funds. We have put together a layman s explanation

### Market Risk for Single Trading Positions

Chapter 6 Market Risk for Single Trading Positions Market risk is the risk that the market value of trading positions will be adversely influenced by changes in prices and/or interest rates. For banks,

### Hedging Strategies Using Futures. Chapter 3

Hedging Strategies Using Futures Chapter 3 Fundamentals of Futures and Options Markets, 8th Ed, Ch3, Copyright John C. Hull 2013 1 The Nature of Derivatives A derivative is an instrument whose value depends

### Index Options Beginners Tutorial

Index Options Beginners Tutorial 1 BUY A PUT TO TAKE ADVANTAGE OF A RISE A diversified portfolio of EUR 100,000 can be hedged by buying put options on the Eurostoxx50 Index. To avoid paying too high a

### It is common to evaluate the performance

VWAP Strategies ANANTH MADHAVAN ANANTH MADHAVAN is managing director of research at ITG Inc., in New York City. It is common to evaluate the performance of traders by their ability to execute orders at

### Understanding Margins. Frequently asked questions on margins as applicable for transactions on Cash and Derivatives segments of NSE and BSE

Understanding Margins Frequently asked questions on margins as applicable for transactions on Cash and Derivatives segments of NSE and BSE Jointly published by National Stock Exchange of India Limited

Goldman Sachs Electronic Trading India: Algorithmic Trading FIXGlobal Face2Face Electronic Trading Forum - India 11 Agenda Goldman Sachs Algorithmic Trading solutions available in India How to access the

### Credit Suisse Asset Management Headline Ideas 2015 Dividends An Important Source of Income When Interest Rates Are Low. For qualified investors only

Credit Suisse Asset Headline Ideas 2015 Dividends An Important Source of Income When Interest Rates Are Low For qualified investors only Dividends An Important Source of Income When Interest Rates Are

### PRE- AND POST- MARKET TRADING FOR US STOCKS: Are You Missing Out on Liquidity?

GLOBAL AGENCY BROKERAGE PRE- AND POST- MARKET TRADING FOR US STOCKS: Are You Missing Out on Liquidity? By Kapil Phadnis and Shawn Chen Summary For U.S.-listed stocks, a significant percentage of the day

### Adjusting for Size Liquidity and Risk Effects in Foreign Exchange Trading

AUTHORS Jim Cochrane Director ITG TCA for FX jim.cochrane@itg.com Ian Domowitz Managing Director Head of ITG Analytics ian.domowitz@itg.com Milan Borkovec Managing Director Head of Financial Engineering

### 1 Uncertainty and Preferences

In this chapter, we present the theory of consumer preferences on risky outcomes. The theory is then applied to study the demand for insurance. Consider the following story. John wants to mail a package

### Empirical Analysis of an Online Algorithm for Multiple Trading Problems

Empirical Analysis of an Online Algorithm for Multiple Trading Problems Esther Mohr 1) Günter Schmidt 1+2) 1) Saarland University 2) University of Liechtenstein em@itm.uni-sb.de gs@itm.uni-sb.de Abstract:

### An Unconventional View of Trading Volume

An Unconventional View of Trading Volume With all the talk about the decline in trading volume (over 30% on a year- over- year basis for most of the third quarter) you would think that no one is playing

### Today s bond market is riskier and more volatile than in several generations. As

Fixed Income Approach 2014 Volume 1 Executive Summary Today s bond market is riskier and more volatile than in several generations. As interest rates rise so does the anxiety of fixed income investors

### Trade Execution Analysis Generated by Markit

Trade Execution Analysis Generated by Markit Global Liquidity Partners Execution Peer Review 2nd Quarter 2015 Contents S VT POV Report Summary Summarizes the trade execution document and illustrates the

Triton All the trading power of ITG, now on your desktop. Client-Site Trading Products Triton ITG is known as the leader in quantitative trading, with more extensive capabilities and expertise than any

### The Benefits of Making Systematic Trade-Offs Between Risk and Return

The Benefits of Making Systematic Trade-Offs Between Risk and Return August 2015 By Jeremy Berman Justin Frankel Co-Portfolio Managers of the RiverPark Structural Alpha Fund The Benefits of Making Systematic

### Target Date Glide Paths: BALANCING PLAN SPONSOR GOALS 1

PRICE PERSPECTIVE In-depth analysis and insights to inform your decision-making. Target Date Glide Paths: BALANCING PLAN SPONSOR GOALS 1 EXECUTIVE SUMMARY We believe that target date portfolios are well

### Overlapping ETF: Pair trading between two gold stocks

MPRA Munich Personal RePEc Archive Overlapping ETF: Pair trading between two gold stocks Peter N Bell and Brian Lui and Alex Brekke University of Victoria 1. April 2012 Online at http://mpra.ub.uni-muenchen.de/39534/

### RISK WARNING. Retail transactions conducted with NatureForex are not insured by any deposit insurance of any kind.

RISK WARNING High Risk Investment Margined retail foreign exchange or currency ( forex ), commodities and financial derivatives transactions are extremely risky. Trading with Nature Forex Ltd. ( NatureForex

### UBS Global Asset Management has

IIJ-130-STAUB.qxp 4/17/08 4:45 PM Page 1 RENATO STAUB is a senior assest allocation and risk analyst at UBS Global Asset Management in Zurich. renato.staub@ubs.com Deploying Alpha: A Strategy to Capture

### Setting the Scene. FIX the Enabler & Electronic Trading

Setting the Scene FIX the Enabler & Electronic Trading Topics Overview of FIX and connectivity Direct Market Access Algorithmic Trading Dark Pools and Smart Order Routing 2 10,000+ firms use FIX globally

### Option pricing in detail

Course #: Title Module 2 Option pricing in detail Topic 1: Influences on option prices - recap... 3 Which stock to buy?... 3 Intrinsic value and time value... 3 Influences on option premiums... 4 Option

### Market Linked Certificates of Deposit

Market Linked Certificates of Deposit This material was prepared by Wells Fargo Securities, LLC, a registered brokerdealer and separate non-bank affiliate of Wells Fargo & Company. This material is not

### Concentration of Trading in S&P 500 Stocks. Recent studies and news reports have noted an increase in the average correlation

Concentration of Trading in S&P 500 Stocks Recent studies and news reports have noted an increase in the average correlation between stock returns in the U.S. markets over the last decade, especially for

### STRATEGIES FOR USING ETFS. Tax Loss Harvesting Investors can sell individual stock positions currently

STRATEGIES FOR USING ETFS Tax Loss Harvesting Investors can sell individual stock positions currently trading below purchase price, realize the loss and maintain similar exposure by purchasing the appropriate

### ASSET ALLOCATION TO ISRAEL: STRENGTHENING YOUR PORTFOLIO BY INCLUDING ISRAELI GLOBAL EQUITIES. May 2014

ASSET ALLOCATION TO ISRAEL: STRENGTHENING YOUR PORTFOLIO BY INCLUDING ISRAELI GLOBAL EQUITIES May 2014 FOREWORD BlueStar Global Investors develops investment solutions and research on Israeli and Middle

### Index Volatility Futures in Asset Allocation: A Hedging Framework

Investment Research Index Volatility Futures in Asset Allocation: A Hedging Framework Jai Jacob, Portfolio Manager/Analyst, Lazard Asset Management Emma Rasiel, PhD, Assistant Professor of the Practice

### The Role of Alternative Investments in a Diversified Investment Portfolio

The Role of Alternative Investments in a Diversified Investment Portfolio By Baird Private Wealth Management Introduction Traditional Investments Domestic Equity International Equity Taxable Fixed Income

### Answers to Concepts in Review

Answers to Concepts in Review 1. Puts and calls are negotiable options issued in bearer form that allow the holder to sell (put) or buy (call) a stipulated amount of a specific security/financial asset,

### EVOLUTION OF CANADIAN EQUITY MARKETS

EVOLUTION OF CANADIAN EQUITY MARKETS This paper is the first in a series aimed at examining the long-term impact of changes in Canada s equity market structure. Our hope is that this series can help inform

### Best of Breed in Global Algorithmic Trading

Best of Breed in Global Algorithmic Trading by Gary Ardell & William Capuzzi Published by THE TRADE Algorithmic trading & smart order routing - 3rd edition Best of breed in global algorithmic trading William

### Foreign Exchange Investments Discover the World of Currencies. Private Banking USA

Foreign Exchange Investments Discover the World of Currencies Credit Suisse Securities (USA) llc Private Banking USA 2 Foreign exchange: There s no ignoring the largest market in the world. Introduction

### Pricing and Strategy for Muni BMA Swaps

J.P. Morgan Management Municipal Strategy Note BMA Basis Swaps: Can be used to trade the relative value of Libor against short maturity tax exempt bonds. Imply future tax rates and can be used to take

### Investing in International Financial Markets

APPENDIX 3 Investing in International Financial Markets http:// Visit http://money.cnn.com for current national and international market data and analyses. The trading of financial assets (such as stocks

### FTS Real Time System Project: Using Options to Manage Price Risk

FTS Real Time System Project: Using Options to Manage Price Risk Question: How can you manage price risk using options? Introduction The option Greeks provide measures of sensitivity to price and volatility

### Score. Stifel CONQUEST Portfolios. Research-Driven Portfolios PORTFOLIO STRATEGY EXCHANGE TRADED FUNDS. Ease of Diversification

Stifel CONQUEST Portfolios PORTFOLIO STRATEGY The Washington Crossing Advisors Stifel CONQUEST Portfolios seek to add value by actively allocating assets among U.S. equities, bonds, commodities, and foreign

### The Risk/Reward Properties of Bull Spreads

The Risk/Reward Properties of Bull Spreads ThE RiSk/REWaRD PRoPERTiES of BUll SPREaDS Bull Spreads are versatile instruments. They can be used to trade direction, to trade volatility or, in conjunction

### Forum. Protection Strategies: Thinking beyond the VIX. A meeting place for views and ideas. Thomas Gillespie PhD, Director, Investment Risk Advisory

Forum A meeting place for views and ideas Protection Strategies: Thinking beyond the VIX Published September 2012 Authored by: Thomas Gillespie PhD, Director, Investment Risk Advisory Scott Maidel CFA

### Internet Appendix to Momentum, Reversal, and Uninformed Traders in Laboratory Markets * 1. I. Instructions for Experiment One

Internet Appendix to Momentum, Reversal, and Uninformed Traders in Laboratory Markets * 1 I. Instructions for Experiment One Overview During this session, you will trade shares in 12 different securities

### Pairs Trading Algorithms in Equities Markets 1

AUTHORs Di Wu Vice President, Algorithmic Trading di.wu@itg.com Kenny Doerr Director, Electronic Trading Desk kenny.doerr@itg.com Cindy Y. Yang Quantitative Analyst, Algorithmic Trading yu.yang@itg.com

### The Hidden Costs of Changing Indices

The Hidden Costs of Changing Indices Terrence Hendershott Haas School of Business, UC Berkeley Summary If a large amount of capital is linked to an index, changes to the index impact realized fund returns

### Fixed Income Liquidity in a Rising Rate Environment

Fixed Income Liquidity in a Rising Rate Environment 2 Executive Summary Ò Fixed income market liquidity has declined, causing greater concern about prospective liquidity in a potential broad market sell-off

### SAXO BANK S BEST EXECUTION POLICY

SAXO BANK S BEST EXECUTION POLICY THE SPECIALIST IN TRADING AND INVESTMENT Page 1 of 8 Page 1 of 8 1 INTRODUCTION 1.1 This policy is issued pursuant to, and in compliance with, EU Directive 2004/39/EC

### Laddering a Portfolio of Municipal Bonds

CONTRIBUTORS J.R. Rieger Global Head Fixed Income Indices james.rieger@spdji.com Tyler Cling Senior Manager Fixed Income Indices tyler.cling@spdji.com Bond laddering is a strategy that calls for maturity

### How credit analysts view and use the financial statements

How credit analysts view and use the financial statements Introduction Traditionally it is viewed that equity investment is high risk and bond investment low risk. Bondholders look at companies for creditworthiness,

### Stock market simulation with ambient variables and multiple agents

Stock market simulation with ambient variables and multiple agents Paolo Giani Cei 0. General purposes The aim is representing a realistic scenario as a background of a complete and consistent stock market.

### Corporate Portfolio Management

Corporate Risk Corporate Portfolio Management Capital allocation from a risk-return perspective Premise Aligning the right information with the right people to make effective corporate decisions is one

### To Cope with Stress? DEMONS of Traders DEMONS. The Mysteries of the Trend Using the Opening Price. The Thought

ASIA PACIFIC S PREEMINENT TRADING MAGAZINE ASIA PACIFIC S PREEMINENT TRADING MAGAZINE November / December 2005 www.traders-journal.com MICA (P) 352/05/2005 The Mysteries of the Trend Using the Opening

### Understanding Leverage in Closed-End Funds

Closed-End Funds Understanding Leverage in Closed-End Funds The concept of leverage seems simple: borrowing money at a low cost and using it to seek higher returns on an investment. Leverage as it applies

### Wealth Management Solutions

Wealth Management Solutions Invest in the Future Life has significant moments. Making sure you re prepared for them is important. But what can you do when the pace of your life leaves you little time to

### Protecting. Gold Bullion. Your Investment Portfolio. with. -an WORLD GOLD COUNCIL

Protecting Your Investment Portfolio -an with Gold Bullion WORLD GOLD COUNCIL gold is an EFFECTIVE diversifier Gold s ability to serve as a diversifier is principally due to its negative correlation with

### Transaction Cost Analysis to Optimize Trading Strategies

W W W. I I J O T. C O M OT F A L L 2 0 1 0 V O L U M E 5 N U M B E R 4 Transaction Cost Analysis to Optimize Trading Strategies CARLA GOMES AND HENRI WAELBROECK Sponsored by: Goldman Sachs Morgan Stanley

### Finance 400 A. Penati - G. Pennacchi Market Micro-Structure: Notes on the Kyle Model

Finance 400 A. Penati - G. Pennacchi Market Micro-Structure: Notes on the Kyle Model These notes consider the single-period model in Kyle (1985) Continuous Auctions and Insider Trading, Econometrica 15,

### ATTITUDE TO RISK. In this module we take a look at risk management and its importance. MODULE 5 INTRODUCTION PROGRAMME NOVEMBER 2012, EDITION 18

INTRODUCTION PROGRAMME MODULE 5 ATTITUDE TO RISK In this module we take a look at risk management and its importance. NOVEMBER 2012, EDITION 18 CONTENTS 3 6 RISK MANAGEMENT 2 In the previous module we

### Yield Curve September 2004

Yield Curve Basics The yield curve, a graph that depicts the relationship between bond yields and maturities, is an important tool in fixed-income investing. Investors use the yield curve as a reference

Journal of Financial s 12 (2009) 418 437 www.elsevier.com/locate/finmar Measures of implicit trading costs and buy sell asymmetry Gang Hu Babson College, 121 Tomasso Hall, Babson Park, MA 02457, USA Available

### HOW TO EXTEND MODERN PORTFOLIO THEORY TO MAKE MONEY FROM TRADING EQUITY OPTIONS

Ta t i a n a L o z o v a i a a n d H e l e n H i z h n i a k o v a HOW TO EXTEND MODERN PORTFOLIO THEORY TO MAKE MONEY FROM TRADING EQUITY OPTIONS HOW TO READ DISPERSION NUMBERS, OR MARKET IS THE BIGGEST

### The Bond Market: Where the Customers Still Have No Yachts

Fall 11 The Bond Market: Where the Customers Still Have No Yachts Quantifying the markup paid by retail investors in the bond market. Darrin DeCosta Robert W. Del Vicario Matthew J. Patterson www.bulletshares.com

### white paper Challenges to Target Funds James Breen, President, Horizon Fiduciary Services

Challenges to Target Funds James Breen, President, Horizon Fiduciary Services Since their invention in the early 1990 s Target Date Funds have become a very popular investment vehicle, particularly with