BO81: Trend Following Terms Explained

Top Traders Unplugged

Niels Kaastrup-Larsen

Business, Business News, Investing, News

4.8 • 670 Ratings

🗓️ 19 May 2020

⏱️ 5 minutes

🔗️ Recording | iTunes | RSS

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Summary

Convexity, Crisis Alpha, Smart Beta, and Implied Volatility…what does it all mean?

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Transcript

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0:00.0	Now, John sends a question to us, which is more about some of the terms that we throw around in our conversations,
0:10.7	and maybe we just talk a little bit about them.
0:14.1	And some of them, I'm not so sure we even use, but maybe we do have an opinion about it.
0:19.3	So first of all, you talk a little bit about if we can just define alpha.
0:24.2	And I think that's probably easily done.
0:28.1	Alpha is usually associated with the outperformance that you deliver compared to your benchmark.
0:34.1	And I think to some extent in the CTA space, I mean, you can argue that it's a little
0:39.2	bit difficult perhaps to say what exactly is your benchmark.
0:42.3	On the other hand, there are three or four that are often quoted.
0:45.5	And I actually mention them in each week's episode when I go through the performance.
0:50.5	But in our case, probably the one that comes closest is what's called the
0:55.1	the sochgen trend uh following index and so anything we can do to deliver better returns
1:01.7	than that for example would be considered uh alpha then you talk about crisis alpha and smart beta
1:10.6	and implied volatility.
1:12.6	Why don't you, Jerry or Moritz talk a little bit about those terms that we come across from time to time as well?
1:22.6	Yeah. So those were implied volatility? Smart beta?
1:29.3	Smart beta and crisis alpha.
1:31.3	Okay. I think crisis alpha we touched on that. What that means is the ability of, especially
1:38.3	ACTA, to perform really well during periods of equity duress, right?
1:46.6	Most people look at equities.
1:47.9	We've said that earlier in this episode.
1:50.0	So equities go down.
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