Featured Publications

Trend Following: a Persistent Market Anomaly

In this note we present a study of trend following using two centuries of data. We find that trend following is a persistent market anomaly with highly significant performance over this long back-test. We also present a combined portfolio of a trend following investment and a standard basket of equities and bonds.

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Hedging Out Market Factors

Large shocks in an equity portfolio are typically driven by correlated (and hence collective) moves of its constituents. This accords correlation matrices a historically central place in numerous studies on portfolio construction and risk management [1].
In this note, we illustrate how certain statistical methods enable us to identify the main market factors (or “modes”) that an equity market neutral portfolio should hedge, in order to extract value from signals, while avoiding exposure to large, collective market moves. These methods rely on the processing of stock returns correlation matrices.
However, because time series are finite, measured correlations are subject to the effects of noise: a fact that one must take into account when employing empirical correlation matrices in portfolio construction. Comparing the properties of empirical correlation matrices to those obtained in random cases, and using results from the theory of random matrices, enables us to distinguish genuine characteristics of the dependence structure of a set of stocks from noisy and unreliable features.

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Explore or exploit? A generic model and an exactly solvable case

Authors Thomas Gueudré, Alexander Dobrinevski, Jean-Philippe Bouchaud

E print http://arxiv.org/abs/1310.5114

Finding a good compromise between the exploitation of known resources and the exploration of unknown, but potentially more profitable choices, is a general problem, which arises in many different scientific disciplines. We propose a stylized model for these exploration-exploitation situations, including population or economic growth, portfolio optimisation, evolutionary dynamics, or the problem of optimal pinning of vortices or dislocations in disordered materials. We find the exact growth rate of this model for tree-like geometries and prove the existence of an optimal migration rate in this case. Numerical simulations in the one-dimensional case confirm the generic existence of an optimum.

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Featured Events

Global Derivatives Trading & Risk Management

Zoltan Eisler will be speaking on Non-Linear Market Impact Across Asset Classes

Global Derivatives Trading & Risk Management is the longest running and largest derivatives & risk management conference in the World. Established in 1994, the conference has built up a reputation as the one must-attend event in the industry.

Attended by over 450 senior practitioners every year, it is the only financial engineering conference to cover such a wealth of derivative asset classes including equity, volatility, interest rate, FX, credit, commodities, hybrid and inflation derivatives as well as securitisation and exchange traded products all under one roof.

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Quant Invest 2016

Quant Invest is Europe’s premier event for the quantitative finance community . It was created 10 years ago to allow institutional investors, quant funds, brokers, academics and advisors to come together and discuss opportunities and challenges within this exciting field of finance .

In 2016 the event will be moving from London to Munich, and will continue offering the opportunity for academics & thought leaders to present their research & ideas, whilst at the same time connecting them with the real world of investors’ and managers’ challenges . Attendees will have the chance to examine the latest strategies & innovations and identify future trends changing their industry.

QI2016 Read More