Active Strategies

Question 1

Name three Active vanilla strategies

Answer 1

Trend-Following
Mean-Reversion
Risk Weighting

Question 2

What is Trend Following

Answer 2

Just going long if trend is positive (different types of trends: Slope of positive drift, MA)

Question 3

What is Mean Reversion

Answer 3

Go long/short when the market falls/rises too quickly (bet that it will come back / it will mean-revert), or breaks specific barriers

Question 4

What is Risk Weighting

Answer 4

Investing reversed to risk by targeting a specific volatility. E.g.: Risk parity, Volatility filters, etc..

Question 5

Momentum historical performance

Answer 5

High SR but also very large crashes. With managed risks, performance can be improved significantly. Presents negative skewness and high kurtosis.

Question 6

Example given of volatility filter:

Answer 6

When volatility is high: Mean-Revert; when low: Trend Follow