which method is most valuable for portfolio trade
A implementation shortfall
B VMAP
C principal trade
D electronic crossing network作者: Analti_Calte 时间: 2013-5-3 12:34
I have no idea what you are asking. There is a language problem here…
If you are trading the whole portfolio and execution needs to be quick and assured, principal trade.
If you are trading the whole portfolio and execution can happen over time, use ECN.
ECN should result in highest value of an entire portfolio trade though.作者: smartpants 时间: 2013-5-3 12:36
portfolio trade invloves an order that requires the execution of purchases or sales in a specific basket of securities as close to the same time as possible作者: bdavi77962 时间: 2013-5-3 12:37
valuable is not the right word as it can have more than one meaning. Monetary value or valuable into complete them.
You can do entire baskets on ECN (I do them every day) or send them as a principal trade.
Execution speed is what matters.
Principal trade is going to create a lower monetary value based on the haircut but assurity of completion.
ECN is going to create a higher portfolio value in a flattish market but may take a couple of clearings to fully fill.作者: pimpineasy 时间: 2013-5-3 12:39
C - i though principal for entire portfolios作者: hassan 时间: 2013-5-3 12:40
ECN is not electronic crossing network作者: troymo 时间: 2013-5-3 12:42
Electronic Communication Network is a type of crossing network.
You have two answers that work.
Again it comes down to quickness of completion.
Principal is the quickest but takes the biggest haircut. Crossing and Communications also handle portfolio baskets on an hourly basis.作者: Fdez 时间: 2013-5-3 12:43
answer is A
Implementation shortfall strategies are typically “front-loaded” in the sense of attempting to exploit market liquidity early in the trading day. Implementation shortfall strategies are especially valuable for portfolio trades, in which control- ling the risk of not executing the trade list is critical. They are also useful in transition management (handing over a portfolio to a new portfolio manager), where multiperiod trading is common and there is a need for formal risk controls.作者: jim8z3 时间: 2013-5-3 12:45
goodman2011 Wrote:
——————————————————-
answer is A
Implementation shortfall strategies are typically
“front-loaded” in the sense of attempting to
exploit market liquidity early in the trading day.
Implementation shortfall strategies are especially
valuable for portfolio trades, in which control-
ling the risk of not executing the trade list is
critical. They are also useful in transition
management (handing over a portfolio to a new
portfolio manager), where multiperiod trading is
common and there is a need for formal risk
controls.
Where in book?
I would have never put that down. I never heard of using algo for basket trade. Must be on dealer side but I can’t even imagine.作者: prav_Cfa7 时间: 2013-5-3 12:46
in the reading44作者: tango_gs 时间: 2013-5-3 12:48
goodman2011 Wrote:
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in the reading44
They are valuable from an opportunity cost standpoint against other algo strategies.
This question is taken far out of context comparing it to other methods.
EOC 18 uses ECN and Broker/Principal to trade a block order.
“The trader should use an implementation shortfall strategy to control the risk of this rebalance. In short, he should minimize explicit costs by waiting for trades to cross in an electronic crossing network, such as the POSIT trading system, but he should also submit names not likely to cross to a broker in order to minimize opportunity costs.”
I guess the answer is all of the above except for VWAP.作者: onelife1 时间: 2013-5-3 12:52
With a portfolio trade, you want liquidity and fast execution. If one of the stocks in the basket is illiquid, then you probably won’t be able to execute the portfolio trade. You also don’t want your trade seating there forever.
So I’ll go with C - Principal Trade.
