Tuesday, June 26, 2012

Interview with Cavenagh Capital (Asian RV Macro)

Cavenagh Capital believe that alpha is achieved though understanding that “fat tails” have become common. Cavenagh focuses on being right about the direction of probability, rather than the direction of the market per se. Trades are structured with an asymmetrical profit and loss outcome from the assessed universe opotential outcomes.

In this Opalesque interview Cavenagh Capital's CIO Lee Ka Shao explains how statistical concepts help macro traders deal with a changed world:
- Markets have become heteroskedastic, meaning that standard deviation of random errors not constant
- The move from unimodal to bimodal world (“risk on – risk off”) deeply affects global macro

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