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Position sizing methods for a trend following CTA
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.).
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.).
2014 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesisAlternative title
Positionsskalningsmetoder för en trendföljande CTA (Swedish)
Abstract [en]

This study examines whether a trend following managed futures fund can improve its performance by changing its position sizing method. Trades for a simple trend following strategy was simulated on 47 futures contracts over the period 1990-2012, using varying methods for determining position size. Eleven different position sizing methods where investigated, among them Target Volatility, Omega Optimization and correlation ranking methods. Both methods previously detailed in academic papers as well as novel approaches was implemented, and compared to the baseline performance of the strategy. The results from this study show that the Target Volatility method, and to some degree Max Drawdown Minimize and Dynamic Stop Lock-In, improved the performance of strategy. The final recommendation for a trend following managed futures fund is to use Target Volatility as position sizing method, possibly in conjunction with Max Drawdown Minimize.

Abstract [sv]

Denna studie undersöker huruvida en trendföljande managed futures-fond kan förbättra sina resultat genom att ändra positionsskalningsmetod. Handel med en enkel trendföljande strategi simulerades på 47 futureskontrakt åren 1990-2012, för olika metoder att för bestämma positionsstorlek. Elva positionsskalningmetoder undersöktes, exemplevis Target Volatility, Omega Optimization och metoder baserade i korrelationsrankning. Både tidigare beskrivna metoder och nya tillvägagångssätt testades, och jämfördes med den grundläggande strategin med avseende på risk och avkastning. Denna studies resultat visar att framförallt Target Volatility, och i viss uträckning Max Drawdown Minimize och Dynamic Stop Lock-In förbättrade nyckeltalen för den handlade strategin. Den slutgiltiga rekommendationen för en trendföljande managed futures-fond är att använda Target Volatility som positionsskalningsmetod, möjligtvis tillsammans med Max Drawdown Minimize.

Place, publisher, year, edition, pages
2014. , 95 p.
Series
Examensarbete INDEK, 2014:47
Keyword [en]
CTA, managed futures, trend following, position sizing, target volatility, omega optimization.
National Category
Mathematical Analysis
Identifiers
URN: urn:nbn:se:kth:diva-147387OAI: oai:DiVA.org:kth-147387DiVA: diva2:730028
Subject / course
Finance
Educational program
Master of Science in Engineering - Industrial Engineering and Management
Supervisors
Examiners
Available from: 2014-07-01 Created: 2014-06-26 Last updated: 2014-07-01Bibliographically approved

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Sandberg&Öhman Msc Th 2014(2751 kB)5780 downloads
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Type fulltextMimetype application/pdf

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Industrial Economics and Management (Dept.)
Mathematical Analysis

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CiteExportLink to record
Permanent link

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Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
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More styles
Language
  • de-DE
  • en-GB
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  • nn-NO
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  • sv-SE
  • Other locale
More languages
Output format
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