Macro and Managed Futures Funds

Question 1

Fundamental Analysis

Answer 1

Underlying financial and economic information to ascertain intrinsic values based on economic modeling

Question 2

Technical Analysis

Answer 2

Relies on data from trading activity, including past prices and volume data.

Question 3

Discretionary funding trading

Answer 3

Occurs when the decisions of the investment process are made according to the judgement of human traders.

Question 4

Systematic Fund Trading

Answer 4

Black box model trading Ongoing trading decisions of the investment process are automatically generated by computer programs.

Question 5

Global Macro Funds

Answer 5

Broadest investment universe:

1) Fixed or managed exchange rates
2) Sovereign bonds
3) Central bank intervention impacts
4) Thematic investing

Question 6

Thematic investing

Answer 6

Not based on a particular instrument or market, rather long term changes

Question 7

Market Micorstructures

Answer 7

Study of how transactions take place, including the costs involved and the behavior of bid and ask prices.

Question 8

Market Risk

Answer 8

Exposure to directional moves in genral market price levels

Question 9

Event Risk

Answer 9

Sudden and unexpected changes in market conditions resulting from a specific event

Question 10

Leverage

Answer 10

Financing to acquire and maintain market positions larger than the assets under management (AUM) of the fund.

Question 11

Managed Futures

Answer 11

Active trading of futres and forward contracts on physical commodities, fianancial assets, and exchange rates.

Question 12

Commodity Pools

Answer 12

Investment funds that combine the money of several investors for the purpose of investing in the futures markets.

Question 13

Public Commodity Pools

Answer 13

General public for investing in much the same way that mutual fund sells its shares to the public.

Question 14

Private Commodity Pools

Answer 14

Invest in the futures markets and are sold privately to high net worth investors and institutional investors

Question 15

Commodity trading advisers (CTAs)

Answer 15

Professional money managers who specialize in the futures markets.

Question 16

Managed Account (or separately managed account)

Answer 16

Money is placed direcly with a CTA in an individual account rather than being pooled with other investors money.

Question 17

Slippage

Answer 17

Unfavorable differences between assumed entry and exit prices and the entry and exit price experienced in practive.

Question 18

Validation

Answer 18

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.

Question 19

Robustness

Answer 19

Reliability with which a model or system developed for a particular data set

Question 20

Out of sample

Answer 20

Not directly used to develop a trading rule or even indirectly used as a basis for knowledge in research.

Question 21

In sample data

Answer 21

Directly used in the backtesting process. Out of sample data consist of more recent data than were used in the backtest.

Question 22

Degredation

Answer 22

Tendency and process through time by which a trading rule or trading system declines in effectiveness

Question 23

Trend-following strategies

Answer 23

Designed to identify and take advantage of momentum in price direction

Question 24

Momentum

Answer 24

Extent to which a movement in security price tends to be followed by subsequent movements of the same security price

Question 25

Mean-Reverting

Answer 25

Situation in which returns show negative autocorrelation-the opposite tendency of momentum or trending.

Question 26

Moving Average

Answer 26

Series of averages that is recalcualte throug time based geon a window of observations.

Question 27

Simple Moving Average

Answer 27

Simple arithmetic average of previous prices.

Question 28

Weighted Moving Average

Answer 28

Usually formed as an unequal average, with weights arithmetically declining from most recent to most distant prices.

Question 29

Exponential Moving Average

Answer 29

Geometrically declining moving average based on a weighted parameter

Question 30

Whipsawing

Answer 30

Trader alternates between establishing long positions immediately before price declines and establishing short positions immediately before price increases.

Question 31

Breakout Strategies

Answer 31

Focus on identifying the commencement of a new trend by observing the range of recent market prices.

Question 32

Volatility Exposure

Answer 32

Trend following strategies are often though of as long volatility price movements

Question 33

Countertrend Strategies

Answer 33

Various statistical measures, such as price oscillation or a relative strength index

Question 34

Relative Strength Index (RSI)

Answer 34

Signal that examines average up and down price changes

Question 35

Pattern Recognition System

Answer 35

Looks to capture non trend based predictable abnormal market behaviors in prices or volatilities.

Question 36

Transparency

Answer 36

Ability to understand the detail within an investment strategy or portfolio

Question 37

Transparency risk

Answer 37

Dispersion in economic outcomes caused by the lack of detailed information regarding an investment regarding an investment portfolio or strategy.

Question 38

Model Risk

Answer 38

Economic dispersion caused by the failure of models to perform as intended.

Question 39

Capacity Risk

Answer 39

Managed futures trader concentrates trades in a market that lacks sufficient depth.

Question 40

Liquidity Risk

Answer 40

Refers to how a large fund that is trading in a thinly traded market will affect the price

Question 41

Lack of trends risk

Answer 41

Comes into play when the trader continues allocating capital to trendless markets