We are thrilled to congratulate Katalysen advisor Alexander Lipton on winning the “Buy-Side Quant of the Year” award in the Risk Awards 2021. The award is handed out by Risk Magazine and Risk.net, the world’s go-to source for news and analysis on risk management. Alexander shares the award with Marcos Lopez De Prado.
Systematic traders who rely on mean-reversion strategies need quantitative tools to alert them when it’s time to pull out of a trade. The problem of estimating stop-loss and profit-taking levels is normally solved by two separate models using the circuitous route of Monte Carlo simulations.
But work published this year by Alex Lipton and Marcos Lopez de Prado takes a novel, more direct tack. Perhaps appropriately for two quants who have chalked up impressive careers on opposite sides of the buy/sell divide – Lipton mostly in banking and Lopez de Prado in investment management – the pair tackle both ends of the problem of optimal trading simultaneously. Their technique adopts a closed-form solution that detects both stop-loss and profit-taking boundaries – and makes more realistic assumptions.
They deploy so-called heat potentials – a mathematical physics concept rarely used in finance and more typically applied to thermodynamics problems, notably in Russia, where its principles help cool nuclear reactors.
The technique is general and powerful, so it can be used for seemingly disconnected problems in finance, like pricing an American option or solving mean-reverting optimal statistical arbitrage strategies,” says Sotiropoulos. “It is an elegant and robust solution.
Visit www.risk.net to read the full article.
Alexander was awarded the first ever Quant of the Year Award in 2001 by Risk Magazine, while he was director of quantitative analysis at Deutsche Bank. In addition to his engagement as advisor at Katalysen, Alexander is Co-Founder at Sila and Investimizer, Partner at Numeraire Financial, Professor & Dean’s Fellow at the Hebrew University of Jerusalem, and Connection Science Fellow at MIT. Alexander was previously at Bank of America Merrill Lynch, where he served for 10 years as Co-Head of the Global Quantitative Group.