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Perfect Timing by

www.randomknowledge.net Michael Kouritzin


Death, taxes ‌and volatility The only 1. Constant is change – Heraclitus of Ephesus (535 BC - 475 BC) 2. Market consistency is volatility 3. Sure non-winning strategy is buy and hold 4. Way to win is to throw your money around

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Volatility Characteristics Scary Bumpy, “Can bite you”

Volatility

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Is this an Alligator?

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Similar Colour

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Same Aspect Ratio

Same color

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Different Number of Legs

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Volatility is Good

Markets become irrational - Mispricing Computer Trading – Faster Decisions not Better Goal: Be Prepared – Fast and Smart PerfectTiming by


PerfectTiming by 4/3/2012

1/3/2012

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Which is Better? 900

800

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Plan 1: Think ahead, Volatility into Returns

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Numb3rs Clip (CBS)

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www.randomknowledge.net  Only

Traded XIU

 Outperforming  

1%/month after

Fees Paying somebody to trade

 2%

Human Error -> Goal: Automate

 3-4%

Small Size Cost -> Goal: Grow

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Plan 2: Sector Rotation (Mar - Apr 2012)

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www.randomknowledge.net REAL LIFE

TECHNOLOGY PLATFORM MAP Model Mathematical model of financial asset dynamics

Asset’s Fair Value

SERP Algorithm Estimation of fair asset values

45

Real Time Market Data

SPADE Strategy

40 35

Based on SERP estimates, provide asset allocation recommendations

30 25 20 15 10 5

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Asset 1

Asset 2

Asset 3

Asset 4

Asset 5


Buying Low and Selling High Random Knowledge MSCI World Index

Overvalued Asset Undervalued Asset

Backtested Performance from Dec 31, 1989 – Dec 31, 2003 PerfectTiming by


PerfectTiming by 12/29/2003

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12/29/1989

CND $

Backtest Performance Chart Return Comparison vs. TSX Composite Jan 1990 - Apr 2004

30000000

25000000

20000000

15000000

10000000

5000000

0


Power of Random Algorithms 1. You write down 2 #s on the back of 2 cards (can’t be equal) – Call a < b 2. I’ll flip 1 at random an exposed card (“EC”) 3. With > 50% Prob., I can guess if the hidden card (“HC”) is greater or less than EC.

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Random Algorithm 1. Generate R = N (0,1) 2. If R > EC, then guess else HC < EC .

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HC > EC


Proof by diagram a < R3 < b guess correct with 100%

R1 < a < b guess correct when EC = b i.e. 50%

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a

b

R2 > a > b guess correct with 50%


Thank you Follow us at www.randomknowledge.net Email me questions at Michael.kouritzin@randomknowledge.net

PerfectTiming by

Mike Kouritzin - Perfect timing  
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