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Creating Dynamic Pretrade Models: Beyond the Black Box
The Journal of Trading (2018)
  • Robert Kissell, Molloy College
We provide a framework for investment managers to create dynamic pretrade models. The approach helps market participants shed light on vendor black-box models that often do not provide any transparency into the model’s functional form or working mechanics. In addition, this allows portfolio managers to create consensus estimates based on their own expectations, such as forecasted liquidity and volatility, and to incorporate firm proprietary alpha estimates into the solution. These techniques allow managers to reduce overdependency on any one black-box model, incorporate costs into the stock selection and portfolio optimization phase of the investment cycle, and perform “what-if” and sensitivity analyses without the risk of information leakage to any outside party or vendor.
Publication Date
Fall 2018
Citation Information
Robert Kissell. "Creating Dynamic Pretrade Models: Beyond the Black Box" The Journal of Trading Vol. 13 Iss. 4 (2018) p. 41 - 48 ISSN: 1559-3967
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