CFA-trading performance evaluatio

这是一篇关于trading ,performance evaluatio的思维导图，主要内容包括：trade strategy and manager selection，portfolio performance evaluation，investment manager selection。

trading ,performance evaluation and manager selection

• trade strategy and manager selection
  • motivation
    • profit seeking
    • risk management / hedging needs
    • cash flow needs
    • corporate actions or index reconstitutions or margin calls
  • strategies and selection
    • trade strategy inputs
      • order characteristics(side , size % of ADV)
      • security characteristics(security type , short term alpha,price volatility,liquidity)
      • matket conditions(market volatility ,liquidity levels)
      • indiiadual risk aversion(risk preference)
    • reference price
      • pre-trade benchmarks
        • decision price
        • previous close price
        • opening price
        • arrival price
      • intraday benchmarks
        • volumn-weighted average price
        • time-weighted average price: advantage:exclude potential trade outliers
      • post-trade benchmarks
        • 交易结束或交易完成，close price
      • price target benchmarks
    • trade strategies
      • trade implementation choices
        • high -touch execution approached: human involvement,costly
        • principal trades(broker risk trades,将风险定价在quoted spread
        • Agency trades
        • straightforward trades in liquid securities ,
          • electronic trading direct market accessDMA,,small currency trades
      • Algorithmic trade
        • scheduled algorithms 按计划执行,historical volumns
          • POVpercentage of volumn participate rate 10%
          • VWAP based on historical intraday volumn
          • TWAP equal number of shares
          • advantage:ensures the specified number of share are executed within the specified time period.Disadvantage:force trade in times of insufficient liquidity,not take advantage of increased liquidity conditions.
        • liquidity -seeking algorithms (opportunistic algorithms)
          • trade aggressively & liquidity sweeping流动性清扫
          • appropriate for large orders& execute quickly & less liquid& thinly trades交易量小
        • arrival price algorithm close to current market price & aggressively & liquid & small order & risk averse quickly to reduce the execution risk
        • dark strategies liquidity aggregators dark pool less transparent & trade venues交易池 large order illiquid markets less urgency
        • smart order routers路由器 the highest of execution for limit orders small enough limit order will not leak information to the market and moves prices
      • comparasion of market
        • equities markets ; fix income markets ; exchange -trade derivatives ; off-exchange derivatives ; spot currencies
  • trade evaluation
    • trade costs measurement
      • implementation shortfall(IS)
    • evaluation trade execution
      • cost in total dollars
      • cost expressed in basis points:
      • marlet-adjusted cost: to remove the impact of market movements on trade cost
      • added value
  • trade governance
• portfolio performance evaluation
  • performance measurement
  • perpormance attribution
    • return attribution
      • arithmetic attribution
      • geometric attribution
        • geometric excess return
      • Equity return attribution--
        • the Brinson model
          • the allocation effect
            • BHB model: allocation effect
            • BF moedl : allocation effect
          • the security selection effect
          • the interaction effect
        • factor-based attribution
          • fundemental factor model
            • Carhart model
      • fixed income attribution
        • exposure decomposition-duration based
        • yield curve decompositon-duration based
        • yield curve decompositon-full repricing based
    • risk attribution
      • Macro attribution Vs. Micro attribution
    • performance attribution
      • return based
        • use only the total portfolio returns over a period to identify the compoents of the investment generating return process
        • simple ,least accurate
      • holdings based
        • reference the beginning of period holdings of the portfolio, shorter time intervals,more accurate ; not adjust any portfolio changes that are made after the initial period ,does not match the actual portfolio returns ;appropriate for passive strategies
      • transactions based
        • uses both the holdings of the portfolio and the transactions that occurred during the evaluation period; most accurate,most difficult and time-consuming
    • types of benchmark
      • liability-based benchmark
      • asset based benchmark
        • absolute(including target )return benchmarks
          • 是manager expect to achieve minimum target return
        • broad market indexes
          • measurement of broad asset class performance
        • style indexes
          • natural grouping of investment disciplines that has some predictive power in explaining the future dispersion of returns across portfolios
        • factor-model-based banchmarks
          • can be constructed to more closely capture the investment decision-making process
        • return based benchmarks (Sharpe style analysis)
          • return for various style indexes
        • manager universes(peer groups)
          • broad group of managers with similar investment disciplines
        • custom securities based benchmarks
          • with the client restrictions
    • evaluation benchmark quality
      • P=Market index return +Style return +Active management return
      • Style return = benchmark return -matket return
      • Active return = overall portfolio return -style benchmark return
      • the broad market index = portfolio return - market return
    • benchmarking alternative investments
    • benchmarking hedge fund investments
    • benchmarking real estate investments
    • benchmarking private equity
    • benchmarking commodity investments
    • benchmarking managed detivatives
    • benchmarking distressed security
  • performance appraisal
    • Sharpe ratio
      • • suitable for a concentrated portfolio or undiversified portfolio
    • Treynor ratio
      • • suitable for fully diversified portfolio
    • Information ratio
      • • the implict assumption is that the chosen benchmark is well matched to the risk of the investment strategies
    • Appraisal ratio
      • • Measure the reward of active management relative to the risk of the active management
    • Sortino ratio
      • • accurately assess performance when return distributions are symmetrical suitabel for investor's primary objective is capital preservation. hedge funds and commodity trading funds
    • Capture ratio
      • • >1,positive asymmetric,convex; <1,nagetive asymmetry,concave
    • drawdown
      • measured the cumulative peak-to-trough loss during continues period
• investment manager selection
  • type 1 error and type 2 error in managers selection
    • null hypothesis: the manager is not skillful
    • type 1 error : rejecting the null hypothesis of no skill when it is corret. Hiring or retaining a manager who subsequently underperform expectation.
    • type 2 error : not rejecting the null hypothesis when it is incorrect .Not hiring or firing a manager who subsequently outperforms,or performance in line with expectation.
    • Decision makers are worry about type 1 error than type2 error
• are approriate for ralatively small orders in liquid market&less urgency & minimize market impact