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What Hedge Funds Really Do by Tucker Balch, Philip J. Romero

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Summary

Quantitative trading strategies have come to dominate the world’s major capital markets. At their core, most of these strategies entail identifying mispriced assets using computer algorithms. The strategies are used in a wide range of applications: From augmenting traditional portfolio management, to exploiting arbitrage opportunities using computers colocated at the exchanges very rapidly and in high volume. While quant strategies have made a number of its leaders into multibillionaires, they have also greatly magnified markets’ inherent volatility—from Black Monday of October 19, 1987, to the Flash Crash of May 6, 2010, each was traced back to programmed or high-frequency trading.

Several good journalistic accounts of quants have been ...

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