Financial Engineering Workshops - David Shelton and Carlos Veiga

Title: Optimization of Risk Exposure and Hard Exit Thresholds

Abstract: Despite invaluable insights from existing research into the optimisation of risk exposure and expected profits, market-makers often need to apply pragmatic risk mitigants to limit the severity of outcomes. We derived closed-form formulae to optimise hard exit thresholds (i.e., stop-loss and take-profit levels and a maximum holding time). The approach yields relationships between profitability, spread size, trade arrival intensity, and adverse selection, as well as insights into other applications.

Bios: * David Shelton has held numerous roles in quantitative finance across derivatives modelling (FX and Credit) and FICC electronic trading since 1998. He holds a DPhil in Theoretical Physics from the University of Oxford.
Bios: * Carlos Veiga is a senior quant with a PhD in quantitative finance. He has previously held positions as a quant, consultant, and derivatives trader.

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