Algorithm Trading-Lehman Brothers

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1、AlgorithmicTradingForRiskManagement,ImpactControl,andAlpha†CaptureExecutiveSummaryThisarticleprovidesasurveyofthelatestalgorithmictradingstrategieswithspecialattentiononhowinvestmentmanagerscanusethesestrategiestoimplementportfoliotradesefficientlyandac

2、hieveseamlessintegrationbetweentheirexecutionandinvestmentprocesses.Majorpointsinclude:ßAlgorithmicstrategiescanbebroadlyclassifiedintosingle-stockbottom-upandportfolio-leveltop-downcategoriesEquityQuantitativeAnalyticsßBottom-upstrategieswithcarefullyc

3、hosenparameterscanbeusedtoefficientlytrade-offshort-termalpha,impactandriskcharacteristicsNewYork745SeventhAvenueNewYork,NY10019ßTop-downstrategiesallowportfolio-leveltradingandinvestmentobjectivesto1.212.526.0887bespecifiedandincorporatedintotheimpleme

4、ntationprocessBoston260FranklinStreetßTradinglimitsandconstraintsattheportfoliolevelofferprotectionfromBoston,MA021101.617.330.5844adverseexecutionsaswellasenhancedriskcontrolLondon25BankStreetßStrategycustomizationtofullyincorporatetheriskandreturncons

5、iderationsofLondonE145LE44.20.7103.2448aspecificmanager’sinvestmentprocesscanleadtoatrulyintegratedimplementationprocessTokyoRoppongiHillsMoriTower6-10-1RoppongiMinato-ku,Tokyo106-613181.3.6440.2655†ThisarticleisbasedonapiecepublishedintheEuromoneyGloba

6、lPortfolioTradingHandbook,2004PLEASESEEIMPORTANTDISCLOSURESBEGINNINGONPAGE14.July8,2004AlgorithmicTradingOVERVIEWWebeginbyreviewingtherapidgrowthofelectronictradingthathasoccurredrecentlyintheequitymarkets,beforemovingontosomeofthereasonsbrokersandinves

7、tmentmanagershavebeguntoadoptalgorithmicstrategiesasacoreelementoftheirapproachtodealing.Wethendescribehowrelativelystandardbottom-upstrategiescanbeusedtomanagerisk,controlimpactandcapturealphaduringthetradingprocess.Finally,wehighlightthewaysinwhichadv

8、ancedfeaturessuchaslimits,portfoliolevelawareness,andinvestmentcustomizationcanbeusedtocreateanapproachtoexecutionthatintegratesseamlesslywiththeinvestmentprocess.TheImplementationShortfallPerspectiveWewillconsistentlyviewimpacta