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heech
Registered: Dec 2008
Posts: 1876 |
01-04-13 01:17 AM
Quote from macintash:
[B the notion that you can’t have a risk managment /position sizing discussion without detailing what you are doing I think is inaccurate. There are some basic risk management tools like max risk on a trade, stop loss, max acceptable DD, market correlation, and how sensitive it is to an upheaval event etc. I also think that max “daily DD� and a daily Sharpe ratio (not monthly DD) generally gives a good feel for the risk of a strategy, I would bet that LJM’s max daily DD was more then .72%. [/B]
Stop loss / max risk on trade are great tools, for certain strategies.... like if a) you only trade liquid instruments with tight spreads in all conditions, and b) if you only trade intraday thus are flat overnight / weekends, c) you only trade delta-one instruments without optionality. Otherwise, as history proves, those concepts are worthless. I have no idea what you trade, but your refusal to open up will raise doubt in any but the most naive investor.
As far as LJM's intra-month DD, I agree it was definitely higher than 0.77%. But I doubt it's high enough to let us suspect they would lose 64% in two months, if 2008 were to repeat. We would have to understand what they traded to know that risk was always there.
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macintash
Registered: Jan 2012
Posts: 239 |
01-04-13 01:50 AM
The DD risk in LJM was easily noticeable in its first 4 years of existence. -36% in 98, -18% in 99, -34% in 2000, -24% in 01, -46% in 02, almost all of it happening in months that the market crashed see enclosed the LJM monthly history going back to 98.
1998 n/a n/a n/a n/a n/a n/a -1.77 -36.99 41.73 3.64 -0.96 -0.22 -10.16%
1999 3.27 10.38 5.32 3.51 7.59 3.91 3.46 7.33 10.10 -18.14 10.52 4.48 60.52%
2000 4.83 6.45 -34.72 -9.38 8.45 6.77 5.59 7.15 2.76 1.50 -4.64 12.70 -3.07%
2001 10.01 -2.61 -0.02 2.50 6.81 3.71 3.50 0.60 -24.25 5.00 12.67 6.65 21.02%
2002 6.40 4.49 3.34 2.08 7.90 -0.68 -46.17 4.42 6.16 3.59 5.65 16.68 -4.24%
2003 0.98 13.53 4.39 7.84 2.26 1.93 5.52 4.20 2.70 10.00 3.15 -2.48 68.20%
2004 4.11 8.27 3.63 4.22 4.85 4.40 4.66 3.63 4.77 -1.74 -0.16 3.51 53.83%
2005 6.73 1.54 1.38 2.26 3.33 4.02 0.54 4.87 5.08 0.88 -0.58 5.97 42.21%
2006 3.08 4.00 4.00 3.34 -1.86 4.55 0.92 5.27 1.34 1.81 2.81 3.38 37.72%
2007 5.07 -2.98 0.07 -11.58 -0.64 4.77 -5.42 8.60 7.14 4.08 5.65 6.71 21.25%
2008 -12.39 14.99 7.13 4.54 5.77 4.94 4.62 4.39 -15.58 -57.15 0.56 3.58 -48.47%
2009 4.14 2.43 -3.09 9.37 5.74 6.26 -6.72 5.62 4.40 -0.42 8.40 6.47 50.02%
2010 3.57 5.95 0.56 -1.06 -6.32 6.61 4.79 8.19 -0.50 5.62 2.89 3.39 38.20%
2011 3.93 1.16 4.31 0.13 6.71 1.66 -8.18 -34.30 6.95 3.48 9.72 8.72 -5.10%
2012 5.56 3.10 1.68 7.73 6.96 1.69 -0.45 6.90 -0.72 4.62 0.28 43.71%
Quote from heech:
Stop loss / max risk on trade are great tools, for certain strategies.... like if a) you only trade liquid instruments with tight spreads in all conditions, and b) if you only trade intraday thus are flat overnight / weekends, c) you only trade delta-one instruments without optionality. Otherwise, as history proves, those concepts are worthless. I have no idea what you trade, but your refusal to open up will raise doubt in any but the most naive investor.
As far as LJM's intra-month DD, I agree it was definitely higher than 0.77%. But I doubt it's high enough to let us suspect they would lose 64% in two months, if 2008 were to repeat. We would have to understand what they traded to know that risk was always there.
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heech
Registered: Dec 2008
Posts: 1876 |
01-04-13 02:07 AM
Quote from macintash:
The DD risk in LJM was easily noticeable in its first 4 years of existence. -36% in 98, -18% in 99, -34% in 2000, -24% in 01, -46% in 02, almost all of it happening in months that the market crashed see enclosed the LJM monthly history going back to 98.
LJM led just about every fund out there in overall Sharpe for much of the past decade, up until 2008.
I'm not sure what your point is... Were you trading during crash years? Seems to me you are also saying blind quantitative analysis of one year's performance, especially last year, tells us little about long term performance? Especially during less ideal conditions?
I'm not sure I have anything more to add to this discussion. I think my point is more than made.
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