RT Journal Article
SR Electronic
T1 Trader Alpha Frontier: A Framework for Portfolio Managers
and Traders to Maximize Portfolio Performance
JF The Journal of Trading
FD Institutional Investor Journals
SP 28
OP 37
DO 10.3905/jot.2012.8.1.028
VO 8
IS 1
A1 Vlad Rashkovich
YR 2012
UL https://pm-research.com/content/8/1/28.abstract
AB Trader performance is currently measured against various benchmarks without consideration for the volatility of trading results. The author introduces trader alpha frontier (TAF) as a way to measure trader performance against the risks taken by the trader. This article formulates how to carve out trader alpha from overall portfolio returns. It also explores trader performance attribution by delineating between the main components of trader alpha and suggesting benchmarks to measure each component. As a result, the author unveils a new benchmark, called execution-weighted price (EWP). It is tough to reach TAF, but it is worth the effort since it aligns the mutual objective of a portfolio manager and a trader to maximize overall portfolio performance.TOPICS: Portfolio management/multi-asset allocation, volatility measures, risk management