Inside the Black Box: The Simple Truth About Quantitative Trading »

Rishi K Narang is the Founding Principal of Telesis Capital LLC, which invests in quantitative trading strategies. Previously, he was managing director and coportfolio manager at Santa Barbara Alpha Strategies. Narang cofounded and was president of Tradeworx, Inc., a quantitative hedge fund manager, from 1999–2002. He has been involved in the hedge fund industry, with a focus on quantitative trading strategies, since 1996. Narang graduated from the University of California at Berkeley with a BA in economics.

Quantitative trading strategies—known to many as “black boxes”—have gained a reputation of being difficult to explain and even harder to understand. While there is a certain level of complexity to this approach, with the right guidance, you can successfully overcome potential obstacles and begin to excel in this arena.

That’s why expert fund manager Rishi Narang has created Inside the Black Box. In a straightforward, nontechnical style—supplemented by real-world examples and informative anecdotes—this reliable resource takes you on a detailed tour through the black box. It skillfully sheds light upon the work that “quants” do, lifting the veil of mystery around quantitative trading and allowing anyone interested in doing so to understand quants and their strategies.

Divided into three comprehensive parts, Insider the Black Box opens with an accessible introduction to the discipline of quantitative trading and quickly moves on to demonstrate that what many call a black box is in fact transparent, intuitively sensible, and readily understandable. Along the way, it also explains how quant strategies can fit into your portfolio and why they are so important.

Whether you’re an institutional investor or high-networth individual, the lessons learned here will help you gain an edge in today’s turbulent market. Some of the tough questions answered throughout these pages include:

• How do quants capture alpha?

• What is the difference between theory-driven systems and data-mining strategies?

• How do quants model risk?

• What can be learned about investing in general from quantitative trading?

• And much more.

Given both the difficulty of the market environment over the past few years and the negativity surrounding hedge funds in general and quant funds in particular, there has never been a better time to become more familiar with what quantitative trading is really about. With the help of the framework found here, you can gain a firm understanding of quant strategies, discern which are more likely to succeed, and ascertain how to use specific strategies in a portfolio, to help improve the performance of your investment process.

Pt. 1 The Quant Universe

Ch. 1 Why Does Quant Trading Matter?

Ch. 2 An Introduction to Quantitative Trading

Pt. 2 Inside the Black Box

Ch. 3 Alpha Models: How Quants Make Money

Ch. 4 Risk Models

Ch. 5 Transaction Cost Models

Ch. 6 Portfolio Construction Models

Ch. 7 Execution

Ch. 8 Data

Ch. 9 Research

Pt. 3 A Practical Guide for Investors in Quantitative Strategies

Ch. 10 Risks Inherent to Quant Strategies

Ch. 11 Criticisms of Quant Trading: Setting the Record Straight

Ch. 12 Evaluating Quants and Quant Strategies

Ch. 13 Looking to the Future of Quant Trading

Notes

Index