Quantitative Trading

Categories: Metrics, Trading

Just the numbers. Quant traders try to find arbitrage-like opportunities wherein some bundle of options, combined, is mispriced relative to buying an underlying series of stocks, or some other related group of assets. Then they wait. And supposedly, over time, the "right" prices reach the endpoint and the traders make money.

It doesn't always work out. See: Long-Term Capital Management. See: Fundamental Analysis, too, because quant traders barely even know what this discipine is. They often can't read an income statement, much less really understand how the companies they're trading in even make money. Wall Street seems to always fall in love with algorithms and black boxes to trade for them...and they work. Until they don't. And then they don't...badly. See the movie Frankenstein for details.

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Finance: What is a quant fund?0 Views

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Finance a la shmoop. What is a quant fund?

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Oooo, algorithms.... Say it with me people algorithm, math, black boxes, spooky [Equations flying around]

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numbers a quant fund is an investment fund

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well usually hedged or with elements of hedging that relies solely on the math [Definition of a quant fund]

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of everything. They don't care much that toothpaste is now being used for crow's [Man putting toothpaste of his face]

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feet abatement and that there's a five-year bullish trend for Colgate they

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don't care that Tesla is dominating the world with electric cars and that [Tesla logos popping up all over the world]

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gasoline will likely be obsolete in a few decades and they don't care that

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people are living longer so life insurance companies have a tailwind [Life insurance sail boat going fast]

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behind them too because insurees will be paying those premiums 17 more months

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on average in the future before they croak. Well all quant funds care about is [People handing over money before they disappear]

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the math of the math, typically a quant fund builds its own proprietary complex

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math laden models which automatically trigger a series of trades at any given [Equations flying around]

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moment in the trading day hoping to benefit even in tiny ways from what are

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essentially arbitrage opportunities or theoretically riskless trades that can [Definition of arbitrage]

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be made taking advantage of mixed pricing in the market all around the

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world. Quant funds as they are now classified as an alternative investment

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in the same vein as hedge funds charge the same exorbitant fee structure and [High fee structure label on quant funds]

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because they do such vast volumes of trading that is something like one-third [Stocks being moved around]

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of all u.s. stock trades now derive from quant fund managers well they give out

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massive commissions and have equally massive sway with the brokerage

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community to you know say nice things about them and encourage people to talk [Newspaper article about quant funds]

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about how great quant funds are yeah and you've probably seen myriad ads on TV [Woman watching TV]

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for their funds you know like this one math it does a body good.. [Dwayne Johnson on the advert]

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