Active Strategies Flashcards
Name three Active vanilla strategies
Trend-Following
Mean-Reversion
Risk Weighting
What is Trend Following
Just going long if trend is positive (different types of trends: Slope of positive drift, MA)
What is Mean Reversion
Go long/short when the market falls/rises too quickly (bet that it will come back / it will mean-revert), or breaks specific barriers
What is Risk Weighting
Investing reversed to risk by targeting a specific volatility. E.g.: Risk parity, Volatility filters, etc..
Momentum historical performance
High SR but also very large crashes. With managed risks, performance can be improved significantly. Presents negative skewness and high kurtosis.
Example given of volatility filter:
When volatility is high: Mean-Revert; when low: Trend Follow
