ORIA (Orthogonal Risk Integrated Alpha) Explanation Part 3 - Joshua Kyan Aalampour — Transcript

Full transcript

1. 0:00Hello everybody, my name is Joshua
2. 0:01Kianpour. This is part three of a mini
3. 0:03lecture series I'm doing on a
4. 0:05quantitative architecture I built called
5. 0:07Oria, which stands for orthogonal risk
6. 0:08integrated alpha. Um in the last part,
7. 0:10we finished up a brief review of the
8. 0:12allocator. And uh now I want to talk
9. 0:15about the risk box and the execution
10. 0:17governor. Uh what is the risk box? What
11. 0:20is the execution layer? You know, what
12. 0:21are these things? The risk box is where
13. 0:24things like volatility, gross, and net
14. 0:27caps, you know, concentration limits,
15. 0:30and you know, also like event filters,
16. 0:32etc. This is where things like this get
17. 0:35enforced. So, very simply put, you can
18. 0:37think of it as a projection from the
19. 0:39desired book into the [music] feasible
20. 0:42book. Okay, so that's why I think it is
21. 0:44actually useful. So, more specifically,
22. 0:46we would have something like this, where
23. 0:48this part we would want to stay close to
24. 0:50the allocator target, [music]
25. 0:51and this part we uh treat as our
26. 0:55rebalance penalty. So, once this is
27. 0:56done, the execution governor comes in,
28. 0:58and it's supposed to translate target
29. 1:00weights into stage orders under
30. 1:01liquidity, under spread, [music] and
31. 1:04participation limits.
32. 1:06So, more specifically, for example, this
33. 1:08would be the target dollar exposure.
34. 1:10Uh this would be the reference price,
35. 1:12and this would be the [music] required
36. 1:14share change. Okay, so this is what I
37. 1:16mean when I say that Oria is an
38. 1:17architecture. It's not just one
39. 1:19strategy. It's made up of all these
40. 1:21different layers. So, we have the
41. 1:22forecast sitting inside an allocator,
42. 1:24which sits inside a risk box,
43. 1:25>> [music]
44. 1:26>> which then sits inside of an execution
45. 1:28layer. And the idea is that each outer
46. 1:30layer makes the inner layer a little bit
47. 1:32more realistic. I was actually inspired
48. 1:33by Russian nesting dolls for this idea.
49. 1:35You know, we have like one within the
50. 1:36other. So, okay. Uh I think that's going
51. 1:39to end uh
52. 1:40the introduction, at least to Oria for
53. 1:42now. So, if you enjoyed this video, give
54. 1:44it a like. Let me know what you thought.
55. 1:46And um
56. 1:47yeah, [clears throat] I'll get better.
57. 1:48I'll get better at teaching and
58. 1:49lecturing. You know, I think I need to
59. 1:50practice that. So, okay. [music] Bye.