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Leverage Trading Strategy of the Kelly Criterion

While the much more use of leverage could be effective in generating alpha o investment, the Kelly strategy is an attractive approach to capital creation and growth. It is originated from the Kelly criterion dubbed ¡§ fortunes formula ¡§ which maximizes the long run growth rate of wealth. There is a tradeoff of rate of return versus risk/volatility as a asymptotic function solution of leverage or position size determined by the application of EGARCH model in the different residual assumptions given by the Normal, Generalized Hyperbolic, and the Generalized Error distributions. No matter there is any timing ability in any strategy, risk management is much more important especially with many repeated trading. We present the performance and risk control of the leveraged ETFs tracked the S&P 500 index in the past ten years using optimal leverage strategy derived by the full Kelly and fraction Kelly criterion.

Identiferoai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0620112-151854
Date20 June 2012
CreatorsFang, Hsuan-Yu
ContributorsKuo,Hsioujen, Wang,Chou-Wen, Lee Chien-Chiang, Huang,Jen-Jsung
PublisherNSYSU
Source SetsNSYSU Electronic Thesis and Dissertation Archive
LanguageEnglish
Detected LanguageEnglish
Typetext
Formatapplication/pdf
Sourcehttp://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0620112-151854
Rightsuser_define, Copyright information available at source archive

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