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The Second Leg Down: Strategies for Profiting after a Market Sell–Off (The Wiley Finance Series)

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en Limba Engleză Carte Hardback – 03 Mar 2017

Notă GoodReads:
Praise for
The Second Leg Down
"The most difficult portfolio management decisions come after an unexpectedly large loss in an unsettled market. This book tackles that situation with a comprehensive, accurate and clear account of clever strategies to navigate the troubled waters with little or no sacrifice of upside. It′s well–written and entertaining. Most of the time you′re better off with the unclever idea of cutting positions to where you′re comfortable for the risk, but if you refuse to do that, this book gives you the best chance of profiting from your aggressiveness."
Aaron Brown, Chief Risk Officer, AQR Capital Management
"Investors can be fickle, only allocating to a given strategy after a stretch of strong performance. Trend following is a classic example: it is an all–weather strategy that deserves a permanent place in a well–diversified portfolio. Reality suggests that investors only want to add defensive strategies when their core (read long beta) investments are failing them. Hari P. Krishnan has written a book that accounts for investor behavior, while providing the best possible solutions when your back is against the wall. This book is essential reading as a survival kit against disaster in your portfolio."
Niels Kaastrup Larsen, Managing Director, DUNN Capital; Founder, Top Traders Unplugged Podcast
"Hari Krishnan is one of the most practical thinkers in this business. He has forgotten what I am still trying to learn! His combination of practical real–world trading experience with theoretical know–how should lead the reader down secret pathways of knowledge few have the privilege to glimpse at, nevermind have illuminated and marked out."
Jerry Haworth, CEO, 36 South Capital Advisors
"How do you survive market crises and moves as sharp as those created by the Brexit and the US election? Predicting outcomes can be an exercise in futility, as these very recent examples have shown us. By tapping into his wealth of knowledge and experience as a fund manager during the 2008 crisis, flash crashes, crises in Europe, and many other market storms, Hari shows us how to weather these events so our portfolios can come out of the other side, intact, and maybe even having made some money in the process! Not only is the book very informative, but a great read as well!"
Marc Malek, Managing Partner, Conquest Capital Group
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Specificații

ISBN-13: 9781119219088
ISBN-10: 1119219086
Pagini: 208
Dimensiuni: 174 x 252 x 20 mm
Greutate: 0.57 kg
Seria The Wiley Finance Series

Locul publicării: Chichester, United Kingdom

Public țintă

The primary audience will be asset managers and asset allocators: Head of Investments, Portfolio Manager (Fund Manager); Portfolio Manager (Bank Asset Management).
The secondary audience will be risk professionals: Head of Financial Risk, Director (Risk Management Software Provider), Risk Manager (Prime Brokerage), Risk Manager (Corporate Finance). 

Textul de pe ultima copertă

Praise for
The Second Leg Down
"The most difficult portfolio management decisions come after an unexpectedly large loss in an unsettled market. This book tackles that situation with a comprehensive, accurate and clear account of clever strategies to navigate the troubled waters with little or no sacrifice of upside. It′s well–written and entertaining. Most of the time you′re better off with the unclever idea of cutting positions to where you′re comfortable for the risk, but if you refuse to do that, this book gives you the best chance of profiting from your aggressiveness."
Aaron Brown, Chief Risk Officer, AQR Capital Management
"Investors can be fickle, only allocating to a given strategy after a stretch of strong performance. Trend following is a classic example: it is an all–weather strategy that deserves a permanent place in a well–diversified portfolio. Reality suggests that investors only want to add defensive strategies when their core (read long beta) investments are failing them. Hari P. Krishnan has written a book that accounts for investor behavior, while providing the best possible solutions when your back is against the wall. This book is essential reading as a survival kit against disaster in your portfolio."
Niels Kaastrup Larsen, Managing Director, DUNN Capital; Founder, Top Traders Unplugged Podcast
"Hari Krishnan is one of the most practical thinkers in this business. He has forgotten what I am still trying to learn! His combination of practical real–world trading experience with theoretical know–how should lead the reader down secret pathways of knowledge few have the privilege to glimpse at, nevermind have illuminated and marked out."
Jerry Haworth, CEO, 36 South Capital Advisors
"How do you survive market crises and moves as sharp as those created by the Brexit and the US election? Predicting outcomes can be an exercise in futility, as these very recent examples have shown us. By tapping into his wealth of knowledge and experience as a fund manager during the 2008 crisis, flash crashes, crises in Europe, and many other market storms, Hari shows us how to weather these events so our portfolios can come out of the other side, intact, and maybe even having made some money in the process! Not only is the book very informative, but a great read as well!"
Marc Malek, Managing Partner, Conquest Capital Group

Cuprins

Preface xi
Acknowledgements xiii
About the Author xv
CHAPTER 1 Introduction 1
The Airplane Ticket Trade 1
The Bull Cycle 2
The Renegades 3
Claws of the Bear 3
Zugzwang 4
The Sceptics 5
A Sad Truth 5
Common Mistakes 6
Imprecise but Effective 7
Hedging Against Implausible Scenarios 8
A Black Swan in Correlation 8
Taking Profits 8
The Good, the Bad and the Ugly 9
The Great Escape 9
Having a Plan 10
Trend Following as a Defensive Strategy 11
Taking the Offensive 12
The Pre–Conditions for Market Crises 12
Banks: The Great Multiplier 13
A Change in Risk Regime 13
CHAPTER 2 Safe Havens and the Second Leg Down 14
The Matterhorn 15
Mrs. Watanabe s No. 1 Investment Club 18
The Risk of What Others are Holding 19
The Risk of What Others are Likely to Do 22
Here We Go Again 24
Summary 28
CHAPTER 3 An Overview of Options Strategies 29
The Building Blocks: Calls and Puts 29
Why Buy a Call or Put? 34
The Black Scholes Equation and Implied Volatility 36
The Implied Volatility Skew 38
Hedging Small Moves 38
Delta Hedging: The Idealised Case 39
Practical Limits of Delta Hedging 41
Hedging Options with Other Options 43
Put and Call Spreads 43
Straddles and Strangles 44
The Deformable Sheet 46
Skew Dynamics for Risky Assets 48
The 1×2 Ratio Spread and Its Relatives 50
The Batman Trade 53
Implied Correlation and the Equity Index Skew 56
From Ratios to Butterflies 59
Calendar Spreads 65
Summary 67
CHAPTER 4 Hedging the Wings 68
Taking the Other Side of the 1×2 68
Comparing the 25 and 10 Delta Puts 69
Hedging Sovereign Bond Risk 78
Selling Put Ratio Spreads on the S&P 500 83
The Hypothetical Implied Distribution 83
Our Findings So Far 84
Back–Tests: A Cautionary Note 84
A Short Digression: Delta–Neutral or Comfortably Balanced? 87
The 665 Put 87
Implications of the Square Root Strategy 88
Futures vs Spot 89
A Dramatic Example 89
A Cross–Sectional Study 91
The New VIX: Model–Independent, Though Not Particularly Intuitive 94
The Spot VIX: Oasis or Mirage? 94
Migrating to VIX Options 98
Reflections on Figure 4.36 101
Migrating to Different Markets: The V2X 103
Risk–Regime Analysis 104
Conditional Performance of Hedging Strategies 106
Summary 109
CHAPTER 5 The Long and the Short of It 110
Short–Dated Options 110
The Physicists Weigh In 112
Buying Time 117
Long–Dated Options 119
Far from the Madding Crowd 121
R Minus D 122
The Lumberjack Plot 125
Selective Application of the Weekly Options Strategy 126
Summary 127
CHAPTER 6 Trend Following as a Portfolio Protection Strategy 128
What is Trend Following? 128
Trend Following Dogma 130
The Crisis Alpha Debate 131
An Aside: Diversifying Across Time 134
Taking Advantage of a Correction 135
The Niederhoffer Argument 135
Chasing 1–Day Moves 138
Pushing the Analogy Too Far 139
Analysing the Data Directly 141
LEGO Trend Following 142
Summary 143
CHAPTER 7 Strategies for Taking Advantage of a Market Drop 144
The Elastic Band 144
Trading Reversals 147
More Texas–Style Hedging 149
Selling Index Put Spreads 151
Breathing Some Life into the Equity Risk Premium 152
Buying VIX Puts 153
Selling VIX Upside 154
The Remarkable Second Moment 155
Summary 158
CHAPTER 8 Flash Crashes , Crises and the Limits of Prediction 159
Lord of the Fireflies 159
Cascading Sales 160
A Concrete Example 162
An Aside 162
Paths, Prints 163
The Role of the Central Bank 164
Credit Cycles at the Zero Bound 164
The Monetary Policy Palette 165
Reading the Tea Leaves 168
Summary and Conclusion 169
GLOSSARY 171
REFERENCES 173
INDEX 177

Notă biografică

HARI P. KRISHNAN, PHD, is a fund manager at Cross–Border Capital, where he runs systematic macro and volatility strategies. Cross–Border is a London–based hedge fund with roughly US$300 million in assets. He previously managed a CTA for a London–based asset management boutique, and he was an executive director and co–head of alternative asset allocation at Morgan Stanley (Chicago and London). In addition, Dr. Krishnan has worked as an options trading strategist and as a senior economist at the Chicago Board of Trade. He received a PhD in applied math from Brown University, and he was a post–doctoral research scientist at the Columbia Earth Institute, Columbia University, before moving into finance.