Macro and Managed Futures Funds Flashcards
Fundamental Analysis
Underlying financial and economic information to ascertain intrinsic values based on economic modeling
Technical Analysis
Relies on data from trading activity, including past prices and volume data.
Discretionary funding trading
Occurs when the decisions of the investment process are made according to the judgement of human traders.
Systematic Fund Trading
Black box model trading Ongoing trading decisions of the investment process are automatically generated by computer programs.
Global Macro Funds
Broadest investment universe:
1) Fixed or managed exchange rates
2) Sovereign bonds
3) Central bank intervention impacts
4) Thematic investing
Thematic investing
Not based on a particular instrument or market, rather long term changes
Market Micorstructures
Study of how transactions take place, including the costs involved and the behavior of bid and ask prices.
Market Risk
Exposure to directional moves in genral market price levels
Event Risk
Sudden and unexpected changes in market conditions resulting from a specific event
Leverage
Financing to acquire and maintain market positions larger than the assets under management (AUM) of the fund.
Managed Futures
Active trading of futres and forward contracts on physical commodities, fianancial assets, and exchange rates.
Commodity Pools
Investment funds that combine the money of several investors for the purpose of investing in the futures markets.
Public Commodity Pools
General public for investing in much the same way that mutual fund sells its shares to the public.
Private Commodity Pools
Invest in the futures markets and are sold privately to high net worth investors and institutional investors
Commodity trading advisers (CTAs)
Professional money managers who specialize in the futures markets.
Managed Account (or separately managed account)
Money is placed direcly with a CTA in an individual account rather than being pooled with other investors money.
Slippage
Unfavorable differences between assumed entry and exit prices and the entry and exit price experienced in practive.
Validation
Trading rules refers to the use of new data or new methodologies to test a trading rule developed on another set of data or with another methodology.
Robustness
Reliability with which a model or system developed for a particular data set
Out of sample
Not directly used to develop a trading rule or even indirectly used as a basis for knowledge in research.
In sample data
Directly used in the backtesting process. Out of sample data consist of more recent data than were used in the backtest.
Degredation
Tendency and process through time by which a trading rule or trading system declines in effectiveness
Trend-following strategies
Designed to identify and take advantage of momentum in price direction
Momentum
Extent to which a movement in security price tends to be followed by subsequent movements of the same security price
Mean-Reverting
Situation in which returns show negative autocorrelation-the opposite tendency of momentum or trending.
Moving Average
Series of averages that is recalcualte throug time based geon a window of observations.
Simple Moving Average
Simple arithmetic average of previous prices.
Weighted Moving Average
Usually formed as an unequal average, with weights arithmetically declining from most recent to most distant prices.
Exponential Moving Average
Geometrically declining moving average based on a weighted parameter
Whipsawing
Trader alternates between establishing long positions immediately before price declines and establishing short positions immediately before price increases.
Breakout Strategies
Focus on identifying the commencement of a new trend by observing the range of recent market prices.
Volatility Exposure
Trend following strategies are often though of as long volatility price movements
Countertrend Strategies
Various statistical measures, such as price oscillation or a relative strength index
Relative Strength Index (RSI)
Signal that examines average up and down price changes
Pattern Recognition System
Looks to capture non trend based predictable abnormal market behaviors in prices or volatilities.
Transparency
Ability to understand the detail within an investment strategy or portfolio
Transparency risk
Dispersion in economic outcomes caused by the lack of detailed information regarding an investment regarding an investment portfolio or strategy.
Model Risk
Economic dispersion caused by the failure of models to perform as intended.
Capacity Risk
Managed futures trader concentrates trades in a market that lacks sufficient depth.
Liquidity Risk
Refers to how a large fund that is trading in a thinly traded market will affect the price
Lack of trends risk
Comes into play when the trader continues allocating capital to trendless markets
