Exchange-risk Books

Hidden Markov Models have come into vogue in recent years in various fields. Notably automatic speech recognition. An HMM is useful in a Bayesian context, where you have to work back from some observations to discern an underlying probability model that is supposedly generating those observations. Often in the presence of noise. Well, it turns out that this general description can also be applied to financial models, which is the book's subject.

Various specific models are tackled. Including the seminal Black-Scholes, where the security market is modelled as a Markov modulated Brownian. Typically, the maths in the book uses sophisticated probabilistic analysis and often assuming Markov processes. As an aside, if your field is electrical engineering or information theory, where you might have used Markov processes, then your background should suffice if you want to migrate to finance. It's not that different, at a certain conceptual level.

The book could be improved by the addition of an index.

This is a very practical nuts-and-bolts "How to save the economic world". Macro institutions are neccessary to avoid various prisoner dilemma decision issues.

The UN, World Bank, IMF and a few others attempt to carry this mantle, and they do not really execute, and for the same reason - national interest always overides collective interests.

With regards to environmental issues, Shiller's proposals in this text would be quite good at addressing the current conflicts that exist in formulating an agreement.

In the end, however, the best voting and pricing machine is the market. If we price carbon in the marketplace and limit its release, market prices will reflect all known information about carbon.

firs of all i would pay to thank to the author of the book and then i would say that i am really impressed by the mind of the author any person can get knowldege from the endeavor of the author

This book covers the basics of this strategy very well; however it contains way too much filler information, and not enough substance. The author treats the reader as a novice to the market; but in reality no stock market novice would even begin to understand this strategy - therefore the author misses his target audience!

In my opinion, it is good entry entry-level reading for the market beginner who wants to understand the basics of a hedge fund; however it is not for the seasoned trader demanding greater insight in to a leading-edge strategy.

The market has always intrigued me. However, following the advice of well meaning, financially secure friends never brought me the success I sought. It turns out that it's much harder to pick winning stocks than I expected. Even the mutual funds I owned were disappointing. "Create Your Own Hedge Fund" really opened my eyes with insight and clear step-by-step guidance in teaching me a profitable, yet safer, way to invest.

The best two skills I gained from this book were: How to build a portfolio and how to make money using one rather simple strategy. This book gave me the necessary confidence to take control of my own finances and provided compelling reasons for doing so. I learned that ETFs (exchange traded funds) are much less expensive to own than what Wolfinger calls 'traditional mutual funds' ...and, on average, make more money.

Wolfinger clearly outlines exactly how to use ETFs and options - a topic that had always scared me. His detailed explanation of how options work convinced me that options are indeed doable. I was also pleasantly surprised to discover that I've been using "options" for years - rain checks at the grocery and auto insurance policies are both essentially options. And the best part - another surprise to me - is that options actually lessen risk. My chances of losing money are now less than they were before.

The author skillfully enables his readers to understand the rationale behind trading decisions with a multitude of examples that make the lessons come to life.

The book also contains useful background information, references and statistics to support the author's ideas. I tried it, and so far, it really works. I make my own decisions now and am happy with the results. Don't be afraid - if I can do it, so can you. As Wolfinger says, I feel like I'm running my own small fund.

The newest craze in investment publishing involves something about "hedge funds." These mysterious investment vehicles (to the unsophisticated public) are seen as the investment of choice for the "rich" investor looking for outsized market gains, or a reduction in risk.

The author seemed to be taking advantage of this when he titled the book. In actuality, there is nothing more here than a basic (and I do mean basic), primer on Exchange Traded Funds, and basic options trading strategies (covered calls and short puts).

The first few chapters involve wasted pages on Modern Portfolio theory, the advantage of index funds over mutual funds, and the benefits of ETF's over traditional index funds. Anyone who is knowledgable enough to be interested in hedge fund strategies (ie. statistical arbitrage, relative value, market neutral, etc.) will find nothing here that he or she doesn't already know.

The second half on trading options on ETF's is similarly light on any interesting information. Much basic information on covered calls and short puts is covered. It wouldn't be unfair to call it simplistic.

Unfortunately, the author did not discuss the important concept of implied volatility when discussing writing strategies on ETF's. This makes certain option strategies, that normally are equivalent, less than equal when used on an ETF.

The book correctly states short puts are equivalent to covered calls, when the puts are secured by cash. If you are going to buy 500 shares and write 5 calls, it is simpler to just sell 5 puts, and hold cash to back them up.

But the author neglects to mention that options on indexes often trade at what is called an IV skew. Out of the money calls on ETF's are generally underpriced, while the puts are overpriced. This makes short puts backed by cash superior to covered calls on an ETF. But Lord help you if the market gets caught in a huge sell off, or implied volatility increases.

There was no discussion of identifying when it is prudent to sell options and when it is wise to remain unhedged. It didn't address the various follow ups to covered call/short put strategies when the stock moves adversely.

If you know absolutely nothing about ETF's, and options trading strategies, then you might find this useful. If you are looking for information on hedge fund techniques, look elsewhere.

Hedge funds have been in the news lately. Since for the last few years, some have done very well. So it's quite a hot topic. Also true of ETFs, which have proliferated. Wolfinger's title invokes both, in an attempt to attract as large a readership as possible. Alas, the title is somewhat misleading.

The text gives next to nothing about how hedge funds tend to operate. Instead, it is mostly about explaining what ETFs are, and why you might want to own them. One key reason, as furnished by the text, is that you can then write (i.e. sell) covered calls on them. This increases the short term income you can garner from owning an ETF.

Commendably, the author does not recommend buying of options. He says, correctly, that on average, this is a losing game. It is reassuring to read this, for it means that the book is not one of these breathless tales about how to make money quickly.

The explanation of options could have been made 20 years ago. It is fairly limited; meant for a reader with little previous experience in finance. The only truly new material concerns describing ETFs.

The author's strategy is conservative. But in its own way, also limited. To the extent that an efficient market exists for the pricing of the underlying stocks in an ETF, then the covered calls will be priced fairly accurately by Black-Scholes. But if there is an unexpected upside, then your ETF will be sold when the call expires in the money. While if there is an unexpected downside, you retain your ETF and get the call income to reduce your losses. The problem is that if you do this method long enough, you relinquish the unexpected gains. And you end up holding losers.

This second edition has been greatly expanded with materials on the mechanics of the foreign exchange and options markets. The sections on the international monetary system have been updated, especially with respect to the European monetary system. New sections have been added on exotic currency options, specifically on barriers, average rate, basket and quantos options. There are two new chapters, one on currency option applications and another on currency overlay management.

The book is a fair overview of foreing exchange risk with lots of formulas. I couldn't find much on "advanced strategies for global corporations." For example, less than two pages are used to discuss zero-premium collar programs. It might be OK for new global investors but it's got very little for corporate treasurers.

This book is a good intro to FX risk. Plenty of real world examples serve to drive key points home. Good deal for those looking to learn the basics very quickly but also provides insight into more sophisticated theory.

good explanation of charting techniques, easy to read.

But then it gets vague, "...you are almost certainly to increase your profits measureably by marking your diary with lunar phases and Gann dates and by taking them into consideration..."

And in the putting it all together chapter, there is "learn the system, paper trade the system, stick to the system, review the system..."

The first part of this book details the advantages of commodity speculation as a business (no employees, low overhead, don't have to deal with customers etc.) Afterwards many forms or technical analysis are discussed. eg, chart formations, trading patterns (lindahl, three in a row, gaps). Examples of daily weekly monthly time periods are given. Volume, open interest, financial reports ( committment of traders) are also given. Support lines, seasonal cycles, secular cycles are also given. To sum it up, many systems are combined. The result is a huge number of support, trend lines, and opinions of which the price could go. This books covers many things in a very readable style, (eg. if you..." trade with out stop losses, you'll end up in the lillies") . It gives explantion, shows successful examples of something working, but gives no unifying technique. The reader is left with a bunch of ways to do technical analysis, but with more questions than he started with

Undue Influence would seem to have a couple things going for it: the book jacket claims that Charles Geisst is a best selling author of fifteen books. It covers an important and timely topic: the history of securities regulation, from the Crash of the 20s to the dot-bomb implosion of 2000. But it appears to have been rushed to print. There are parts of the book that are clear and informative, but there's also a lot of bloated and murky prose that should have been edited out.

The Introduction illustrates the faults of the whole book: the first sentence is strong and vivid, but in the following paragraphs, the writing breaks into cliches, mixed metaphors (a cornerstone of the safety net?), vague generalizations, and outright typos and grammatical mistakes.

The index is likewise sketchy. The term 'bucket shop' appears early, without explanation. The index lists only one occurrence, on page 155, well after the term first appears, and the term is not defined there, either.

I looked for the Acknowledgements to learn who edited this (or failed to), but there are no Acknowledgements - maybe no one wants to be associated with this rush job.

If you aren't already familiar with the history of securities regulation, look elsewhere for a good book on this topic.

Professor Geisst has done a great job of making all of the confusion about the regulation and deregulation of Wall Street and the banks clearer. His account of the trend toward freeing the banks from the 1930's laws is very valuable because it shows the behind the secenes working of the different interested parties. The whole debate is part of the larger movement toward reinterpreting the past in a more conservative fashion and I found the book interesting for that reason alone. Reading this, I get the impression that conservatives reacted toward deregulation in the 1980s as strongly as the radicals did for regulation in the 1930s but the major difference was that the old regulations at least responded to a crisis, trying to fix it. The same cannot be said of the free market movement of the recent period. I found this book very vaulable.

It has interviews with spread traders, a Eurodollar spread floor trader, as well as with Steve Moore who publishes daily Internet spread charts.

There's not much content worth your money or time in this volume, whether you're a seasoned pro, a raw trading newbie, or somewhere in between.

A large part of Spread Trading is given over to interviews, which illuminate very little other than a preference among his subjects for trading spreads with trend-following strategies. Sadly, Mr. Abell does nothing to illuminate this further. If you're a trend-follower already the info is nothing new, but if you're not the author fails to provide any tools for understanding why the strategy appeals or how to build a rudimentary system. That's a big shortcoming.

The rest of the interview content is equally tepid. In short, Abell is no Jack Schwager. His interviews aren't quite worthless, but there's very little to take away here -- for either beginners or professionals. If you're looking for interviews with traders who have made it, save your money for whatever copy of the Market Wizards series you don't already own.

Another large chunk of the book is taken up with charts and data tables detailing seasonal spread relationships. This might be of some use, but to make that determination you'll have to fire up the ol' CQG (or testing platform of choice) and test whether or not these relationships still hold. There's no discussion at all about how this data was, or might have been, converted into a profitable trading system. That's fine if you already know what you're doing, but if that's the case you don't need to make a donation to Mr. Abell. The data is intriguing, but if you have a charting service (and a backtester) you should just take a look at some spreads year by year on your own. If not, it's probably over your head until you develop a little more as a trader.

I'm a spread trader myself, and while I dutifully read my partner's copy of this book from cover to cover, I wouldn't recommend you do so. Buy this only if you're willing to pay the cover price for that seasonal data. At least you'll get a nugget of a trading idea there -- although one that requires a great deal of polish.

The book was written 1997, do not get confused with the publishing date of 2003. The printed daily line charts are from 1997 without hardly any description. The same almost applies to the numerous useless pages filled with tables of historical spread trades that (maybe) could have been done between 1981 and 1996. This book neither contains stategies nor addresses risk at all. Furthermore the book is full of sentences of the following kind: "Computer generated Numbers. Most traders have a library of proven computer numbers. They may be applied with success in spread trading. The only caveat however, is that they usually are not self-contained systems and should be used along with the several other devices I have spoken about."
My advice: Walk away from this trade!

If I had wanted a psychology book I would have bought one! Mr. Abell is obviously obsessed with the subject as there is almost nothing in this book that gives the nuts and bolts of spread trading. 45% deals with the psychology of trading, 45% of it are interviews with "successful" spread traders, and the remaining 10% if you discount the charts deals with spreading. Save your money.

The book was written 1997, do not get confused with the publishing date of 2003. The printed daily line charts are from 1997 without hardly any description. The same almost applies to the numerous useless pages filled with tables of historical spread trades that could have been done between 1981 and 1996. This book does not contain stategies at all. Furthermore the book is full of sentences of the following kind: "Computer generated Numbers. Most traders have a library of proven computer numbers. They may be applied with success in spread trading. The only caveat however, is that they usually are not self-contained systems and should be used along with the several other devices I have spoken about."
My advice: Walk away from this trade!

The adverse excursion evaluation and exploitation does play an important role in systematic trading, however, the book later on skin-deep touches trading management and betting strategies, which in turn do not have much to do with the title of the book.

As a professional futures trader, I bought this book in the search for new ideas to refine my money management rules. I have been utilizing the same trading system for years, but this book has enabled me to capture more of my systems open profit, while also limiting the size of potential losing trades.

If you do not currently have a trading system, this book will not give you one. The purpose of this book is to help the trader eliminate some of the rough edges of an existing system's money management procedures.

If you are trading a system, or wish to learn more about money management rules, pick up a copy of this book, as many new ideas are discussed. Also, be sure you are using Microsoft Excel, as spreadsheets are used frequently throughout the book, and duplicating the examples is useful.

Warning: Read book very slowly

The concept requires total concentration-while reading in order to throughly understand MAE. The idea is a sound one but requires that the reader provides a working system AND is able to backtest it. Otherwise, the reader is left with a concept that on paper makes sense but it is very hard to implement into his/her trading system.

The ideas and concepts expressed in this book are a true, real eye-opener. The basic idea is that losing trades usually go against you right from the start, while the winning trades don't.
This extremely powerful idea alone allowed me to cut my losses by up to 60% ! Thanks Mr. Sweeney !

Warning: Read book very slowly

The idea is a sound one but requires that the reader provides a working system AND is able to backtest it. Otherwise, the reader is left with a concept that on paper makes sense but it is very hard to implement into his/her trading system.

It is useful for the investment analysts.