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Quantitative Finance · Begrippenlijst

Wat is Strategy capacity, capacity curve, profit-maximising size?

Ook bekend als: capacity curve · profit-maximising size · strategy capacity

Definition 28.1 Research Craft: Predictors, Backtests, Measurement, Portfolios · Hoofdstuk 28 — Capacity, Decay and Crowding

A capacity curve gives a strategy’s net return, net Sharpe ratio and dollar profit against the size of the capital it runs, each size traded with its costs. The profit-maximising size is the size at which dollar profit peaks. A strategy’s capacity is the size beyond which a stated criterion fails: here, the size at which its net Sharpe ratio falls to half its best.

Capacity curves of chapter 27’s fifty-name book: net Sharpe ratio (left) and dollar profit (right) against fund size, for the fixed rule and the book re-optimised at each size (profit below -\$300 million is drawn at -300). Data: rs_capacity.curve.
Figure 28.1. Capacity curves of chapter 27’s fifty-name book: net Sharpe ratio (left) and dollar profit (right) against fund size, for the fixed rule and the book re-optimised at each size (profit below −$300-\$300 million is drawn at −300-300). Data: rs_capacity.curve.
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