Randomness of price values - page 14

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Swetten:

Nobody knows you here, nobody wants you here.

But everybody knows you here... Flapping in every thread... teaching everyone about life...
 
Reshetov:

Under such conditions, with positive expected payoffs, they are not required to do anything other than artificially maintain liquidity. They are not traders, investors or even market makers, but exchange specialists. There is no risk in their activity, because they only get paid for their work.

Actually, there is inherent risk in supporting liquidity.

p.s. What do market makers do, if not providing liquidity? Puppeteering? :D

 

The average profitability of hedge funds in the industry is 50% per year. The average terms are as follows: A hedge fund charges 2% for management, regardless of the outcome. And 20% on positive returns.

For example, for a $1 billion portfolio, the profit for the year is $500 mio, of which $100 mio remains in the ownership of the hedge fund.

A hedge fund almost always tries to use a 100% deposit load. That is, if the hedge fund has $1bn invested, the portfolio weighs in at $1bn. No leverage, all 1:1 - real full collateral. Mind you, at the end of trading, hedge funds try to move the portfolio into cash, minimising risk. Almost no long-term trading.

The portfolio consists of all NYSE+NASDAQ financial instruments with different weightings. Zero is also a weighting factor (the corresponding financial instrument is not trading at the moment) . Rebalancing (redistribution of weight coefficients) of the portfolio takes place continuously. The sum of absolute values of weighting coefficients near unity - full deposit load. Positions, both longs and shorts.

Historical data (the full dynamics of changes of the market rate for each financial instrument) for backtesting weighs terabytes (more than 100 000 data per second) and is usually stored for not more than the last three months. Backtesting is not fast. And certainly not accurate, as the strategy always has an impact on the market. Especially if it is in the high-frequency class.

Don't think that a large backtesting fund is something brilliant. Not at all, anyone can write a strategy and offer it (with skill) to a hedge fund on a collaborative basis. For example, renting out a strategy.

The average private American trader has a deposit > $100K (minimum to live on profit). From $1 mio deposit with a private trader is a rarity. The reason is simple, at such sums the individual creates his own hedge fund.

 
I'll set up my own hedge fund... bring me all your money :) everyone gets 50% of what they put in... no cheating... all's fair...
 
Thanks for the information, hrenfx. So 50% p.a. with this much capital is now quite realistic.
 
Aleksander:
I'll set up my own hedge fund... bring me all your money :) everyone gets 50% of what they put in... no cheating... it's honest...

Well, well, well, Aleksander. We need to be cut in. I don't want to be a mediocre customer :)
 
Special offer - For homeowners, discounts and free indicators (2,540 pcs.) ....
 
hrenfx:

The average US private trader has a deposit of > $100K (the minimum to live on). A private trader's deposit of $1mio or more is rare. The reason is simple, at such sums the individual builds up his own hedge fund.


On the profit from a 100K deposit in the U.S. you can not live. The maths here is simple:

  1. A nice house of 200-300 sqm costs $500K-1M. With a 5% 30 year morgage, the monthly fees are about $2.5-5k. It is certainly possible to live in a $100-300k house, but such a house would likely be in an area where bars are needed on the windows. It is possible to rent a 3-room flat for $2-3k per month. Let's assume for simplicity that the house costs $2.7k per month.
  2. You have to pay about $200 a month for electricity and water.
  3. You also have to pay about $150 a month for telephone, TV and internet.
  4. Car, $30-40k. Normal family needs two cars: for husband and wife. A month $400 for yourself and $400 for the wife.
  5. Food for a family of four, $800 a month.
  6. Health insurance for each family member, $800 per month for a family of 4.
  7. Petrol, $50 a month.
  8. All other expenses (clothes, restaurants, trips to resorts, etc.) $2k per month.

Add it all up and you get $7.5k a month, or $90k a year. This amount should be equal to the return on investment after taxes. Assume that taxes are equal to 40%. Then pretax profit should be $90k/0.6=$150k per year. Assume that average return on deposit is 10% per year (this is historical stock market return). That is, the deposit would have to be $1.5M to allow the average American family to live on a profit. God forbid you end up in a hospital where you have to pay from $20k per week and insurance pays only a fraction of those costs. And if someone in the family goes to university, you need another $20-25k a year. In short, you need at least a $2M deposit for an American family to live on a profit.

 

gpwr, the calculation is good but that's not what I meant. Look at the statistics on salaries in the US. If one person's annual income is several tens of thousands, that might roughly correspond to a profit from a 100k deposit... Although, of course, the profitability should be much higher than the standard 10% per year.

 
NorthAlec:

gpwr, the calculation is good but that's not what I meant. Look at the statistics on salaries in the US. If one person's annual income is several tens of thousands, that might roughly correspond to a profit from a 100k deposit... Although, of course, the profitability should be much higher than the standard 10% per year.


Since I live in the US, I can assure you that tens of thousands of dollars a year is a miserable existence. You have to be guided by the lifestyle of the average American.
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