TTU18: Estimating & Predicting Black Swans ft. Peter Kambolin of Systematic Alpha Management – 2of2

Top Traders Unplugged

Niels Kaastrup-Larsen

Business, Business News, Investing, News

4.8 • 670 Ratings

🗓️ 31 July 2014

⏱️ 61 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

Imagine if your assets under management went from $721 million to $50 million….

Would you have the courage to stick with your system?

Our next guest was able to weather that storm and come out even stronger. In fact, he gives credit to the fall in assets because it was an important component to improving their processes and efficiency today.

We’re excite to share with you, the second part of my interview with CEO of Systematic Alpha Management, Peter Kambolin.

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In This Episode, You’ll Learn:

How many markets Peter trades and the number of different spreads
The three points during a day in which volatility is elevated
What triggers an exit from a trade when profit levels haven’t been reached
How Systematic Alpha Management makes decisions relating to sizing market positions
The number of daily trades Systematic Alpha implements
How much of the P/L comes from the hedge component of spread decisions
What kind of Risk Budgets that Systematic Alpha Management runs
How to drawdown profile has changed over the last few years
Estimating and predicting Black Swan events
How Peter personally balances the challenging feelings of managing a portfolio in drawdown
Exploring mean reversion and how the hedge ratios change daily
On the value of being located in the heart of New York
The biggest challenge for Peter in running Systematic Alpha Management
Peter’s opinion on why success in the CTA industry has shifted from the United States of America to Europe
Why individuality is critical in success in the CTA industry
Peter Kambilin’s biggest failure and what he learned from it
Some fun facts about Peter that you probably would never have guessed

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Transcript

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0:00.0	You're listening to Top Traders Unplugged, episode number 018, where I continue my conversation with Peter Cambolin, co-founder and CEO of Systematic Alpha Management.
0:13.3	This episode is sponsored by Saxo Bank and Swiss Financial Services.
0:18.2	Welcome back to Top Traders Unplugged, where the best traders in the world
0:22.2	come to share their experiences,
0:24.1	their successes, and their failures.
0:26.2	Let's rejoin the conversation
0:27.5	with your host,
0:28.6	veteran hedge fund manager,
0:30.0	Nealz Kastra Plarsen.
0:50.2	We're going to get a good party. Tell me, Peter, how many markets do you trade altogether and how many combinations of spreads do you have in your portfolio?
1:05.8	Yes, well, we trade approximately 20 to 25 different markets that include major global equity indices, major currencies, and we just use three commodities for hedging.
1:24.6	We trade about 20 to 30 different spread combinations, but each spread we trade in a variety of different sub-models, up to maybe 20. What that means is that, let's say you have a spread that fluctuates,
1:30.3	right, goes up and down, etc. We apply different logic, different rules when we play straight.
1:40.3	Because we don't know that the sign wave that a spread could experience moving up and down is not always the same.
1:49.2	The amplitude of the move could be different, the time it takes, could be different, et cetera.
1:53.1	So we have model that on average would hold positions, let's say, three hours.
1:59.4	Some other models will have holding times of, you know, let's say, three hours, some other models will have holding
2:01.6	times of, you know, let's say 10 hours and others will hold somewhat longer. So we try to
2:06.6	exploit short-term mean-reverting moves on the spreads and longer-term mean-reverting moves on the
2:13.6	spreads, all within, let's say, a day and a half to date. And what's interesting is that by diversifying our holding time, the returns that are generated,
2:24.3	they are often uncorrelated to one another.
2:26.1	So let's say we could be trading S&P Futsi, British pound spread at hold for three hours,
	...

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