{"product_id":"trading-risk-isbn-9780471650911","title":"Trading Risk","description":"Revolutionary techniques that traders can implement to improve profits and avoid losses  \u003cp\u003eNo trader, professional or individual, can afford not to have a solid risk management program integrated into his or her trading system. But finding a precise mathematical model to replace subjective decision-making processes is a challenge. Traditionally, risk management has focused solely on loss avoidance, but in Trading Risk, hedge fund risk manager Kenneth Grant presents some-thing completely new—how to manage a portfolio to minimize risk and increase profits by putting more capital at risk. Trading Risk details a risk management program that can help both money managers and individual traders evaluate which elements in a portfolio are working efficiently and which aren’t. By illustrating an extremely simple set of statistical and arithmetic tools this book can help readers enhance their performance in many financial markets.\u003c\/p\u003e \u003cp\u003eKenneth L.Grant is Cheyne’s Global Risk Manager, and is the Managing Member for Cheyne Capital, LLC, the firm’s U.S. arm. Mr. Grant is a pioneer in the field of hedge fund risk management and capital allocation. Before joining Cheyne, he created risk control programs at two of the world’s leading hedge funds, Tudor Investments and SAC Capital, where he was eventually promoted to the title of Chief Investment Strategist. Mr. Grant holds a Bachelor of Science in Economics and Mathematics from the University of Wisconsin, an MA in Economics from Columbia University, and an MBA from the University of Chicago Graduate School of Business.\u003c\/p\u003e \u003cp\u003ePreface ix\u003c\/p\u003e \u003cp\u003eAcknowledgments xiv\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 1 The Risk Management Investment 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 2 Setting Performance Objectives 19\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eOptimal Target Return 21\u003c\/p\u003e \u003cp\u003eNominal Target Return 24\u003c\/p\u003e \u003cp\u003eStop-Out Level 26\u003c\/p\u003e \u003cp\u003eThe Beach 32\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 3 Understanding the Profit\/Loss Patterns over Time 37\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eAnd Now to Statistics, but First a Word (or More) about Time Series Construction 39\u003c\/p\u003e \u003cp\u003eTime Units 40\u003c\/p\u003e \u003cp\u003eTime Spans 43\u003c\/p\u003e \u003cp\u003eGraphical Representation of Daily P\/L 48\u003c\/p\u003e \u003cp\u003eHistogram of P\/L Observations 51\u003c\/p\u003e \u003cp\u003eStatistics 53\u003c\/p\u003e \u003cp\u003eA Tribute to Sir Isaac Newton 53\u003c\/p\u003e \u003cp\u003eAverage P\/L 56\u003c\/p\u003e \u003cp\u003eStandard Deviation 57\u003c\/p\u003e \u003cp\u003eSharpe Ratio 65\u003c\/p\u003e \u003cp\u003eMedian P\/L 68\u003c\/p\u003e \u003cp\u003ePercentage of Winning Days 68\u003c\/p\u003e \u003cp\u003ePerformance Ratio, Average P\/L, Winning Days versus Losing Days 69\u003c\/p\u003e \u003cp\u003eDrawdown 70\u003c\/p\u003e \u003cp\u003eCorrelations 73\u003c\/p\u003e \u003cp\u003ePutting It All Together 79\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 4 The Risk Components of an Individual Portfolio 81\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eHistorical Volatility 84\u003c\/p\u003e \u003cp\u003eOptions Implied Volatility 86\u003c\/p\u003e \u003cp\u003eCorrelation 90\u003c\/p\u003e \u003cp\u003eValue at Risk (VaR) 91\u003c\/p\u003e \u003cp\u003eJustification for VaR Calculations 92\u003c\/p\u003e \u003cp\u003eTypes of VaR Calculations 94\u003c\/p\u003e \u003cp\u003eTesting VaR Accuracy 98\u003c\/p\u003e \u003cp\u003eSetting VaR Parameters 99\u003c\/p\u003e \u003cp\u003eUse of VaR Calculation in Portfolio Management 102\u003c\/p\u003e \u003cp\u003eScenario Analysis 104\u003c\/p\u003e \u003cp\u003eTechnical Analysis 106\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 5 Setting Appropriate Exposure Levels (Rule 1) 109\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eDetermining the Appropriate Ranges of Exposure 110\u003c\/p\u003e \u003cp\u003eMethod 1: Inverted Sharpe Ratio 111\u003c\/p\u003e \u003cp\u003eMethod 2: Managing Volatility as a Percentage of Trading Capital 114\u003c\/p\u003e \u003cp\u003eDrawdowns and Netting Risk 129\u003c\/p\u003e \u003cp\u003eAsymmetric Payoff Function 130\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 6 Adjusting Portfolio Exposure (Rule 2) 133\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eSize of Individual Positions 134\u003c\/p\u003e \u003cp\u003eDirectional Bias 135\u003c\/p\u003e \u003cp\u003ePosition Level Volatility 141\u003c\/p\u003e \u003cp\u003eTime Horizon 142\u003c\/p\u003e \u003cp\u003eDiversification 144\u003c\/p\u003e \u003cp\u003eLeverage 146\u003c\/p\u003e \u003cp\u003eOptionality 148\u003c\/p\u003e \u003cp\u003eNonlinear Pricing Dynamics 149\u003c\/p\u003e \u003cp\u003eRelationship between Strike Price and Underlying Price (Moneyness) 149\u003c\/p\u003e \u003cp\u003eImplied Volatility 150\u003c\/p\u003e \u003cp\u003eAsymmetric Payoff Functions 150\u003c\/p\u003e \u003cp\u003eLeverage Characteristics 151\u003c\/p\u003e \u003cp\u003eSummary 154\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 7 The Risk Components of an Individual Trade 155\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eYour Transaction Performance 156\u003c\/p\u003e \u003cp\u003eKey Components of a Transactions-Level Database 157\u003c\/p\u003e \u003cp\u003eDefining a Transaction 158\u003c\/p\u003e \u003cp\u003ePosition Snapshot Statistics 160\u003c\/p\u003e \u003cp\u003eCore Transactions-Level Statistics 161\u003c\/p\u003e \u003cp\u003eTrade Level P\/L 162\u003c\/p\u003e \u003cp\u003eHolding Period 162\u003c\/p\u003e \u003cp\u003eAverage P\/L 163\u003c\/p\u003e \u003cp\u003eP\/L per Dollar Invested (Weighted Average P\/L) 164\u003c\/p\u003e \u003cp\u003eAverage Holding Period 164\u003c\/p\u003e \u003cp\u003eP\/L by Security (P\/L Attribution) 165\u003c\/p\u003e \u003cp\u003eLong Side P\/L versus Short Side P\/L 166\u003c\/p\u003e \u003cp\u003eCorrelation Analysis 168\u003c\/p\u003e \u003cp\u003eNumber of Daily Transactions 170\u003c\/p\u003e \u003cp\u003eCapital Invested 171\u003c\/p\u003e \u003cp\u003eNet Market Value (Raw) 172\u003c\/p\u003e \u003cp\u003eNet Market Value (Absolute Value) 173\u003c\/p\u003e \u003cp\u003eNumber of Positions 174\u003c\/p\u003e \u003cp\u003eHolding Periods 175\u003c\/p\u003e \u003cp\u003eVolatility\/VaR 177\u003c\/p\u003e \u003cp\u003eOther Correlations 179\u003c\/p\u003e \u003cp\u003eFinal Word on Correlation 179\u003c\/p\u003e \u003cp\u003ePerformance Success Metrics 184\u003c\/p\u003e \u003cp\u003eMethods for Improving Performance Ratios 189\u003c\/p\u003e \u003cp\u003ePerformance Ratio Components 190\u003c\/p\u003e \u003cp\u003eMaximizing Your P\/L 192\u003c\/p\u003e \u003cp\u003eProfitability Concentration (90\/10) Ratio 200\u003c\/p\u003e \u003cp\u003ePutting It All Together 208\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 8 Bringin’ It on Home 213\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eMake a Plan and Stick to It 214\u003c\/p\u003e \u003cp\u003eIf the Plan’s Not Working, Change the Plan 218\u003c\/p\u003e \u003cp\u003eSeek to Trade with an “Edge” 219\u003c\/p\u003e \u003cp\u003eStructural Inefficiencies 220\u003c\/p\u003e \u003cp\u003eMethodological Inefficiencies 223\u003c\/p\u003e \u003cp\u003ePlay Your P\/L 226\u003c\/p\u003e \u003cp\u003eAvoid Surprises—Especially to Yourself 234\u003c\/p\u003e \u003cp\u003eSeek to Maximize Your Performance at the Margin 236\u003c\/p\u003e \u003cp\u003eSeek Nonmonetary Benefits 237\u003c\/p\u003e \u003cp\u003eApply Liberal Doses of Humility and Humor 242\u003c\/p\u003e \u003cp\u003eBe Healthy\/Cultivate Other Interests 244\u003c\/p\u003e \u003cp\u003e\u003cb\u003eAppendix Optimal f and Risk of Ruin 245\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eOptimal f 246\u003c\/p\u003e \u003cp\u003eRisk of Ruin 250\u003c\/p\u003e \u003cp\u003eIndex 253\u003c\/p\u003e  Kenneth L.Grant is Cheyne’s Global Risk Manager, and is the Managing Member for Cheyne Capital, LLC, the firm’s U.S. arm. Mr. Grant is a pioneer in the field of hedge fund risk management and capital allocation. Before joining Cheyne, he created risk control programs at two of the world’s leading hedge funds, Tudor Investments and SAC Capital, where he was eventually promoted to the title of Chief Investment Strategist. Earlier in his career, Mr. Grant led risk management efforts for the Chicago Mercantile Exchange and Société Générale. He is also a member of the Board of Directors of the Managed Futures Association (MFA), and is a founding member of MFA’s Hedge Fund Advisory Committee–the industry’s leading trade relations organization. He is a principal author of MFA’s Sound Practices for Hedge Fund Managers (2000). Mr. Grant holds a Bachelor of Science in Economics and Mathematics from the University of Wisconsin, an MA in Economics from Columbia University, and an MBA from the University of Chicago Graduate School of Business.  It is an age-old maxim–and one that few would challenge–that traders run the risk of crashing by taking on too much risk. But as Kenneth Grant asserts in Trading Risk, money managers and individual traders also suffer by not taking enough targeted risk. Small, profitable trades are fine, but they’ll never harvest the substantial profits investors require to take their portfolios to the next level. What traders need is a reliable system for managing risk–so they can confidently make the big investments they desire and achieve the results they deserve.  \u003cp\u003eKenneth Grant has managed portfolio risk for several of the world’s most elite, successful hedge funds. Now, he shares his trade secrets, showing how the aggressive trading that is the signature of leading hedge funds can be applied by traders at all levels without excessive risk. Trading Risk offers revolutionary yet practical techniques for real-world traders, not superficial theories or complex quantitative formulas. Grant’s proven scientific strategies are presented in accessible language any trader can understand–and put into practice.\u003c\/p\u003e \u003cp\u003eMany professional traders are constrained by firm-wide risk management rules that stifle major growth. Individual traders are often overwhelmed by books presenting quantitative formulas that practically require PhDs to implement. Both kinds of traders too often default to a loose collection of subjective rules of thumb. Grant’s system is a simple yet effective solution–and it strips away much of the subjectivity that makes major deals appear too hazardous for many traders.\u003c\/p\u003e \u003cp\u003eUsing an extremely simple set of statistical and arithmetic tools, Grant illustrates how to evaluate which portfolio elements are working and which are not. He then shows you how to control your exposure–and prepare for inevitable periods of suboptimal performance without going bust. Grant also helps you interpret the statistical makeup of your portfolio, and discusses how to use these statistics to make decisions consistent with both your financial objectives and your constraints.\u003c\/p\u003e \u003cp\u003eTrading Risk demonstrates that traders virtually always have control over their portfolios and that risk can be managed even during the worst market crises–from Enron to the tech bust. With this book in hand, you’ll be able to devise and execute a customized risk management strategy. Whatever type or level of trader you are, Trading Risk offers the key to dynamic investing that doesn’t leave your assets out of control.\u003c\/p\u003e  A revolutionary system for fearless trading without excessive risk  \u003cp\u003e\"Trading Risk provides a useful and intuitive roadmap of the risk management process, as written by an individual with unique experience and insight into this topic. It is an engaging read and covers complex subject matter in a straightforward and often-entertaining manner.\"\u003cbr\u003e – Stanley Shopkorn, Shopkorn Associates\u003c\/p\u003e \u003cp\u003e\"Ken Grant's eminently readable new book on risk management is a rare blend of theory and practical applications. It is a great starting point for the novice and deep enough for the experienced practitioner.\"\u003cbr\u003e – Mark R. Graham, Managing Partner, Blue Elite Fund, Ltd.\u003c\/p\u003e \u003cp\u003e\"This book describes a very practical approach to risk management in a lucid and entertaining manner. Anyone concerned with the topic of risk management ought to find it of interest.\"\u003cbr\u003e – Susan Estes, Managing Director, Countrywide Securities\u003c\/p\u003e \u003cp\u003e\"Thoughtful, unique, detailed, actually enjoyable, and comprehensible reading for what is normally a boring and confusing topic.\"\u003cbr\u003e – Dwight Anderson, President, Osprei Management, LP\u003c\/p\u003e \u003cp\u003e\"A must-read for risk managers of companies of all sizes who want to preserve capital and take practical advantage of trends in the marketplace. This is a clearly written, funny, and entertaining guide to a very serious topic that affects all corporations. This very complex topic was simplified and made easy to understand by a true expert in the art of risk management.\"\u003cbr\u003e – Phupinder Gill, Managing Director \u0026amp; President\u003cbr\u003e Chicago Mercantile Exchange\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47990403137765,"sku":"NP9780471650911","price":94.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9780471650911.jpg?v=1761787688","url":"https:\/\/k12savings.com\/products\/trading-risk-isbn-9780471650911","provider":"K12savings","version":"1.0","type":"link"}