Optimal design of volatility-driven algo-alpha trading strategies

Guido Giese derives a model for the performance and risk analysis of algorithmic investment strategies that invest in a mixed portfolio of the equity and money markets. It is based on a frequent rebalancing algorithm that responds to changes in volatility of the underlying equity market using a pre-defined response function


Algorithmic investment schemes that invest in a frequently rebalanced portfolio of equity and fixed-income have become more common in recent years. Some are even available to retail investors, through index-tracking products. One can distinguish between two basic types of existing investment schemes: pure return strategies, such as leveraged index-based exchange-traded funds (ETFs) that borrow in the money market to offer leveraged equity returns for risk-seeking investors; and risk-controlled

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