Readings: Algorithmic Trading via IBM, Quantitative Primer, Dhandho
- IBM Financial Services: Tackling latency – the algorithmic arms race
Indeed the need for speed is now so great, that any are talking about latency arbitrage.
. . . This will lead inevitably to an algorithmic arms race as firms compete predominantly for speed in the immediate term.
Indeed, the algorithmic arms race may mimic the military arms race over recent decades, with the short-term focus on weaponry as was seen in the Cold War), being replaced by a longer term focus on combat flexibility and war-gaming strategy.
[Note: At this rate, we individual traders better find a different source of "edge" than real-time data & faster PCs - and shift focus to the medium/long term rather than day trading.]
- Bionic Turtle: Quantitative Primer Video
. . . a one hour introduction to quantitative concepts such as (i) Greek notation, (ii) discount rate & compounding/discounting, (iii) matrix math, and (iv) first-order derivatives.
via TaylorTree.
- FT.com: Profile of Mohnish Pabrai, and his book The Dhandho Investor
The Patels’ approach to business has a word, Dhandho. In Sanskrit, it literally means “Endeavours that create wealth”.
When applying Dhandho to investment, Pabrai added a few more principles. One is to invest in companies with high uncertainty. If there are many possible outcomes for a company in trouble, its share price will suffer – even if in fact most of the outcomes are positive. Markets often in practice treat high uncertainty as a high risk of a big loss. The two are not the same.
Who, beyond the Patels, is a true Dhandho investor? Warren Buffett is one. So is Lakshmi Mittal, who applied Dhandho to steel. Pabrai even labels Virgin’s Richard Branson a Dhandho investor.
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