054: Rishi Narang – Components of a Black Box, Humans Versus Computers, and High Frequency Trading
Chat With Traders
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The Importance of a Risk Model in Trading
The trading system is like any other economist an alligator of scarce resources the scarce resource in this case is capital you have only so much and you want to earn a good return on it think about it the same way that the CEO of a company thinks about it. When I'm going to make business decisions I need to take in various kinds of input and then think about how to transact. A risk model is really about controlling unwanted consequences as much as possible, there's a transaction cost model which tells you if you're going to do this this is how much it's going to cost so is the upside worth it right? These are roughly speaking the three major inputs that any decision maker takes in
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