A Trader’s Guide to Portfolio Risk/Return
to learn about the real world treatment of position keeping in a manner to optimise
risk-adjusted returns. This requires an understanding of not only
"fair value" principles, but also a close examination of static and
dynamic strategies used to maintain positions and the implications to holding
period returns for market makers, investors, and arbitrageurs including:
to provide a lucid explanation of methods used to
analyses and trade various portfolios of securities and derivatives
the principle focus is on understanding trading
strategies and the impact on position value
to understand the tenants of profitability on a risk-adjusted returns basis so as to apply trading and risk management principles
consistent with objectives.
to understand ways of considering optimal risk/return
strategies and then to apply theme consistently
to learn to trade (prop/directional, market making, and arbitrage)
0) Product Review: Optional first day provides a
review basic financial securities and derivatives (especially those that arise
in the body of the presentation and analyses)
1) Review of Risk/Return:
short review of basic risk and
return concepts and emphasis on implication for various types of operations
(e.g. market making, structuring etc)
2) Valuation and Market Dynamics (parts 1 and
2): introduction to
the tools and concepts of product valuation under uncertainty.
Clear and working illustration of both the basic underlying models and
assumptions, the techniques used for valuation/risk management, as well as
implications for real-world application. The same approach is then applied
to introducing and analysing traditional mean-variance portfolio optimisation
methods, and their costs/benefits in the real world.
3) Position Keeping
(parts 1 and 2): This two part
Chapter begins with considering the philosophy and methods of position keeping
conventions as well as their implications for risk/return. Part 2 of the Chapter
is a series of case studies applying all of the valuation, risk/return, and
portfolio optimisation techniques presented. The cases are focused on position optimisation of “single
position portfolios” and have been structured to include an increasing level
of valuation and position optimisation complexity, with extensive discussions on
cases include not only simulated trading strategies, but also back testing of
position P&L against real market data. These include a bond position
hedged in various ways, a swap position and swap spread position, several option
position hedged with delta/delta-gamma/delta-gamma-rho/ as well as profile
matching, a digital option hedged on sensitivity as well as "coupon matching"
profile replication basis, a convertible bond hedged for each of the legs of the
4) Analyses of position holding strategies:
Extension of the concepts and methods to consider the more general
setting of an equity portfolio, as well as a broader class of optimisation techniques for position rebalancing, holding period rebalancing, and back
Additional analyses of considering the pros/cons of various mathematical optimisation
techniques and their relevance and application to the portfolio
management problems (making distinctions between optimal rebalance at a point in
time vs. optimal rebalances over a holding period).
seminar can be easily extended to include the simulations and analyses of
classes of interest to your portfolios.
comprehensive and extensively illustrated Handout Notes (see samples
Plus copies of relevant TG2 Books/e-Books
Seminars can be tailored to your trading, risk, client, and systems needs.
Submit your needs, and/or "cut/paste" from other Seminars (see entire "standard"