Eckhardt MM

Discussions about Money Management and Risk Control.
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LeviF
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Eckhardt MM

Post by LeviF » Tue Feb 23, 2010 11:33 am

In a few interviews Eckhardt states something along the lines of only using "bounded utility functions" in his money management work.

I understand the concept and am sort of using it in that I am pretty sure I would not be trading at my current bet size if I had a few hundred mil in my account.

But I wonder how the concept would influence a CTAs position sizing decisions and if there is something else at work here that is not apparent...

sluggo
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Post by sluggo » Tue Feb 23, 2010 11:47 am

Maybe he is more interested in a lower bound on the utility function. Maybe he doesn't want a utility function to tell him that a 99.99999 percent loss has a utility of minus Infinity.

LeviF
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Post by LeviF » Tue Feb 23, 2010 12:32 pm

Hence the turtle rule reduce notional trading equity by x% for every y% decrease in total equity?

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