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May 9

Inside the Black Box: The Simple Truth About Quantitative Trading

Posted by Bill at 08:36 | Paper Review | Comments(0) | Reads(10680)
This article is a book review for “Inside the Black Box: The Simple Truth About Quantitative Trading”, which is published by Wiley Finance, and written by Rishi K. Narang.

This is an exceptional book for new comers to the quantitative trading, because it is very easy to read and understand. It allows you to pick up the information required to start trading, and much more importantly, making money doing it using the methods instructed in this book.

There is one word of warning though, which is you need to think like a mathematician to utilize its techniques to the fullest. While the math skills needed to implement what is taught in the book, are not at too high of a level, evaluating the data requires a more systematic approach than most beginners possess when they are first starting out in this field.

It is therefore recommended, that if you do decide to uses the systems you learn in this book, you take your time, and do not invest actual funds, until you practice extensively your back end assessing abilities.

A few of the concepts you will learn in the book are Alpha (Which is an active trading strategy), and Beta (Which is a buy and hold approach).  You will also be taught high level risk management skills that you can use with either styles of investing mentioned above.

You will learn how to calculate Value at Risk (VaR), which is typically thought of as a risk loss measure on a portfolio. Whereas instead, it is actually a scale that your models fall into that makes them trustworthy.

What this book is not going to provide you are the meat and potato’s of quantitative trading that so many are looking for. Instead, you will get an overview of the entire field with a great deal of discussion on managing your portfolio.

If you are a long time serious quantitative trader, you might want to pass on this book. However, as with almost all books, there will tidbits of information that you do not know presently, that you could have learned from the book.

There is another person whose skills sets this book matches perfectly, which is the mathematician that has never invested before. Since the book was written by a mathematician, it takes the skills he already possessed, and teaches people that have the same skills, how to make money investing with them.

However, that being said, this is not the only book that you should read and study, if you are truly interested in mastering the art of quantitative trading. The book itself takes many of the most recognizable trading and investing concepts in this industry, and breaks them down into their most basic components.

In conclusion, “Inside the Black Box: The Simple Truth About Quantitative Trading”, does have its detractors, and the book is controversial. This is who should defiantly obtain a copy of the book, mathematician who have never invested previously, novices to quantitative trading, and experts in the field who would find the book useful, if they only where able to learn one helpful piece of information. Who should not buy the book, are specialist in this area, that think they know more about the subject than anybody else, including the author.

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