OI11: Avoiding the Herd: A Different Path to Alpha ft. Jerome Callut
Top Traders Unplugged
Understanding Market Dynamics Through Quantitative Strategies
This chapter examines the influence of large institutional players on market inefficiencies, particularly during month-end trading. It also discusses methods to analyze market participant positioning to anticipate market movements.
In today’s episode Moritz Seibert is joined by Jerome Callut, one of the founders of DCM Systematic, a quantitative hedge fund based in Geneva, Switzerland. DCM Systematic aims to produce returns that are uncorrelated to trend following CTAs by pursuing a different path to alpha. In fact, the team around Jerome is very much focused on avoiding getting into trend following trades. Instead, they emphasize strategies which anticipate the flows of other traders and use several behavior-based models to distinguish themselves from the SG CTA index and other industry benchmarks. Jerome and Moritz speak discuss generic trade examples and Jerome explains why pro-active and re-active risk management is very important for them.
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Episode TimeStamps:
02:21 - Introduction to Jerome Callut
03:52 - Why they use non-trend following models
08:42 - What would happen if they added a trend following component to their model?
09:57 - The 3 categories of their trading system
11:11 - Category 1, Behavioural: Anticipating the flows and trades of other traders
15:35 - An example of how they handle flow
18:35 - Did Callut anticipate the unwind of the Japanese Yen carry trade?
21:51 - Exploiting the skid marks in the markets
23:53 - Category 2: Relative value and spread trading
29:37 - Collecting the roll down yield
31:12 - Is Callut also engaging in a short VIX positioning?
36:59 - Proactive and reactive management
38:33 - What could happen after Volmageddon?
40:42 - How they implement reactive management
41:37 - Category 3: Macro trades
46:37 - What role does automation play at DCM Systematic?
48:36 - How they implement AI and machine learning
53:38 - A work in progress
54:46 - Working with a moving target
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