Search results

Cool. Will do. Thanks guys.

I totally agree...different strokes for different folks. There is certainly more than enough room for both types of trading strategies. At some point, I'm going to reach out to a few of these first loss providers to get more details. Any advice on some good ones to talk to?

Yes, indeed. Although, this assumes that the "oh shit" moment actually happens with these types of leveraged, market neutral strategies. If it doesn't, then I would certainly prefer the strategy with very small drawdowns and steady returns. I hear what you are saying about the breakdown in...

OK. I appreciate the less hyperbolic response Mav. I think we're getting somewhere. So, to recap - from what you and La Horse Noir are saying, the biggest difference is that with the allocator's capital I am not exposed to the vagaries of my broker's margin system. And those vagaries can be...

OK Mav, let's make this easily comparable. Take these examples: 1. I have an IB Port Margin account with 500k cash. I use my 500k to borrow 4.5mil from IB so that I can trade 5 million. I make a trade of $5 million notional exposure. Then, if the notional portfolio loses 5%, my 500k is wiped...

I appreciate the reply Darkhorse. It makes complete sense. The advantages of the allocator's capital over a PortMargin account really come down to the type of trading strategy in quesstion and its level of position concentration. On a different note, how the hell do you guys type so quickly...

Ummm.... if you say so Mav. All your comment tells me is that you don't understand what portfolio margin is, and further, you enjoy gross simplifications of inherently complex things. I recommend that you stay away from any sort of leveraged trading cause "you will blow up and stuff".

Jeeze Mav .... The discussion of leveraging my capital 100-to-1 was simply a exaggerated example I used to illustrate the concept and foster discussion. I wasn't suggesting this is a prudent strategy.

Maverick, I honestly fail to see a more relevant and simple comparison. From a leverage perspective, Portfolio Margin is pretty much the exact same thing, except with a few more risk constraints.

No, I think we are absolutely talking about similar things. Portfolio Margin has everything to do with leverage. While your point about offsets is true, it's certainly not the entire story. A portfolio margin account will allow for up to 10 times leverage on some positions, and six times...

I appreciate the nuanced response Darkhorse and I do understand what you are saying. However, your comments miss some small subtleties about the nature of leverage and its impact on the risk/return profile in the context of a market neutral strategy. So, while I agree with your general...

I'm not knocking the idea of first loss programs. To the contrary, I think the idea sounds fairly interesting. Mike M, I agree with some of your previous posts; these allocators fill a much needed hole in the hedge fund capital raising ecosystem. Getting back to my original question though...

Yes, that is exactly the case I am asking about. With many market neutral strategies, risk goes down as leverage goes up. Ergo, higher leverage results in a higher sharpe ratio and smaller drawdowns. Of course, this is all predicated on the assumption that one could generate returns that...

I'm curious about the mechanics of these "First Loss" type of deals. Feel free to chime in if you know the answer. Say I put up 500k of my own capital and receive an allocation of $4.5 mil for a total account value of $5 million. I think it is safe to assume that all this capital goes into...

I would recommend splitting the data across a few relational tables just so it doesn't grow super huge. So, descriptive info like ticker should be put in a separate table with a autoincrementing primary key. This key number is then used as the foreign key ID in the table holding the price time...

I highly recommend Mysql as it is easy to work with, stable, and available on just about all hosted environments. It even has a pretty decent query browser tool that allows you to query data and view and modify it in an Excel like grid. You can also dump the queried data out as csv files. One...

Cool! Thanks for finding this 1245. Good news everybody - we can all breath a sigh of relief. Portfolio margin assets are only in the low hundreds of billions of dollars. Actually, the funny part is I'm not even sure if I'm being sarcastic or not.

Lol...yes, I don't blame you for stopping at that point. Honestly, it's a bit boring to read. The key takeaway is that Portfolio Margin has increased the probability of a margin call induced meltdown, and this will only increase as more assets flow into PM accounts.

The paper covers a bunch of related topics and you have to read the whole paper to truly get gist of what he is saying. That said, I agree 100% with you cdcaveman, there is definitely hyperbole in that statement. I think it would have better served the paper if they hadn't tried to make that...

This is almost exactly what happened to a bunch of hedge funds in 2007 (during the quant meltdown), 2008 and 2009. You would be shocked to learn how many multi-billion dollar hedge funds are out there that have barely considered this simple scenario.