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Optimal Trading Strategies: Quantitative Approaches for Managing Market Impact and Trading Risk
Author(s): Robert Kissell (Author), Morton Glantz (Author)
- Publisher: Amacom Books
- Publication Date: January 1, 2003
- Edition: First Edition
- Language: English
- Print length: 382 pages
- ISBN-10: 0814407242
- ISBN-13: 9780814407240
Book Description
How can you maximize value instead? The answer lies in the proactive management of transaction costs and selection of trading strategy, the process to which this book is dedicated. Optimal Trading Strategies presents well-developed methodologies for managing and reducing costs throughout all stages of the investment cycle. You will find:
· Quantitative techniques for estimating, analyzing, and managing transaction costs
· A framework for forecasting market impact and risk
· Methodologies to develop optimal trading strategies
· A process to achieve best execution
· Metrics for measuring costs and evaluating performance
Consider this: Two money managers invest in and hold identical portfolios but one manager consistently outperforms the other by as much as 50 to100 basis points per quarter. The more successful manager is inevitably the one who better manages trading costs. In a highly competitive environment where every basis point counts, it is critical to seize every foreseeable advantage for your investors. By using the framework and techniques presented in this book, you will better position yourself to achieve higher portfolio returns.
Editorial Reviews
From the Inside Flap
The overriding methodology in Optimal Trading Strategies has been developed from the viewpoint of investors. It provides a foundation for evaluating trading-related decisions in the same manner CAPM and APT provides for investment-related decisions and Black-Scholes provides for option pricing. The text is enhanced through extensively developed financial theory, statistical models, and is reinforced with illustrative examples.
With scientific rigor, the authors analyze typical problems that arise during the implementation phase of the investment cycle. They present a framework to estimate costs, forecast market impact and timing risk, and develop optimal trading strategies. You will learn how to determine the strategy that meets the goals and objectives of the fund, and achieve best execution. The book provides proven techniques for answering such questions as:
· How do I estimate trading costs?
· How do I forecast market impact and timing risk?
· How do I develop optimal trading strategies?
· How do I choose between agency execution and principal bid?
· How do I select the most suitable broker/dealer arrangement: traditional broker, ECN, or crossing system?
· How do I measure transaction costs?
· How do I evaluate performance?
· How do I achieve best execution?
Specifically, the book presents cutting-edge advancements such as Robert Almgren and Neil Chriss Efficient Trading Frontier (ETF), which shows the optimal trade-off between trading costs and timing risks, and introduces the concept of a Capital Trade Line (CTL), a means for allocating between agency execution and principal bid transaction. Further, it offers a blueprint for computing the economic fair value (FV) for a principal bid from the investor s viewpoint, and an optimization formulation to solve the trader s dilemma. Naturally, it spells out techniques for incorporating transaction costs directly into investment decisions to improve portfolio returns. By disseminating state-of-the-art implementation methodologies to the professional community, Optimal Trading Strategies will aid you in making more effective financial decisions.
About the Author
Robert Kissell (Atlanta, GA) is director of trading research at a major provider of technology-based trading solutions. Morton Glantz (Dix Hills, NY) is the founder of Mort Glantz Associates, a consulting firm specializing in credit, strategic planning, and risk management. He is the author of Scientific Financial Management (0-8144-0500-2).
