Trading Risk: Enhanced Profitability through Risk Control

Rating:
Summary: The Holy Grail of Risk Management
Review: Certain to make the competion tremble! Socalled sophisticates who are enamoured of their own knowledge just won't get the import of this seminal work! Cudos to Grant and welcome those readers to the world of Risk!!

Rating:
Summary: Grant put the Rock and Roll back into Risk
Review: Great Book!! Lots of easy connections and great analogies. A nice break form those stuffy writers who normally populate this area. Grant gets it right with Rock and Roll Baby. What a great way to learn about Risk-- Groovy stuff. The book is a masterpiece of simplicity due to the authors clarity of thought on some complex stuff. I trade for a living. No more reading Playboy in bed at night. This book is now my new bedtime reading of choice. Seriously, it is a great job on a tough subject and it has helped me understand what the hell is going on when my risk manager comes over to my desk to ask me really complicated questions. Now i know a little bit about what he is talking about and how to answer him. Great Stuff. It is like the Cliff Notes on Risk.

Rating:
Summary: Essential Reading
Review: I found this book an essential read, a great book for anyone wanting an insight into how the pros do it

Rating:
Summary: Not for me
Review: I tried this book based off of several of the positive reviews and was disappointed. The "cute" stories and rock and roll music references was not enough to keep it interesting. Sure risk is a difficult subject but this book did not come up with anything new or innovative on the subject. Likewise, the basic premise the author uses of levering and delevering your portfolio based on p/l or perceived opportunities may work fine if the markets are highly liquid and transactions costs are minimal such as in large cap stocks but it is much more complicated for other stratgies and markets. How does the book address converts, mortgages, options, distressed debt, etc? I will save you the money and tell you- it doesn't. Now this may not be an issue if you are a short term oriented active trader of stocks ala SAC or scalping e-minis but for the rest of us that are involved in other strategies it is of zero value.

Rating:
Summary: Essential financial reading
Review: Ignore those naysayers! They are not on the same agenda as Mr. Grant for they have obviously missed the point. This book is quite helpful, especially for first-time finance students.

Rating:
Summary: Must Read on a Neglected Topic
Review: In his book Trading Risk, Ken Grant draws upon his experience as a risk manager for Tudor Investments and SAC Capital to create an insightful and surprisingly non-technical guide for traders and portfolio managers. As Director of Trader Development at a large proprietary trading house, I have been impressed with the role risk management plays in the success of the firm and its individual traders. Moreover, this is a scalable difference: risk management very much impacts the outcomes of individual trades, results of trading days, and performance across entire quarters. Where I believe Grant has admirably succeeded is in documenting that risk management is much more than simply "cutting your losses". Trading Risk systematically breaks down elements of the process of managing trades, from the establishment of concrete objectives to the allocation of risk capital to specific trades and the use of correlation analysis in evaluating trading results. His discussions of adjusting portfolio exposure and evaluating the risk components of individual trades are highly practical and encourage a rigor of self-analysis that is rarely practiced.

Perhaps an example from my own work with traders that overlaps Grant's ideas might be illustrative. I encourage traders to keep a log of all their trades that tracks time of day, position taken, position size, holding period, and profit/loss (P/L). Changes to the position are also documented, as traders scale into or out of trades. From this record, we can evaluate a host of performance statistics, such as position sizing as a function of market volume/volatility, the correlation of profitability with trade size/holding period, and patterns of activity within the trading day. While Grant's background is with portfolio management-appropriate to a manager who is holding a basket of positions in a variety of equities-his ideas are easily adaptable to the intraday trader who is trading a single instrument. By viewing each trade during a day as an element of that day's "portfolio", we can ask important questions about the mix of position sizes, overall directional bias, and the management of volatility as a function of trade capital/loss limits.

Written in an engaging style with bits of humor interspersed, Trading Risk ends with a practical chapter that summarizes the book's major points. He explains the importance of developing and modifying trading plans, defining one's trading "edge", judiciously allocating risk capital, and improving performance "at the margin". This latter point is a particularly neglected element in risk management. For the active, large trader, the ability to squeeze the extra tick out of trades is frequently the difference between a winning day and a losing one. Superior traders have an ability to read the very short-term patterns of price change and momentum to determine when it is prudent to hit the bid or let the market go offer in exiting a position. At such points, good risk management and good trading are indistinguishable.

I have few reservations about Grant's book. A text of 250 pages is not going to provide many workbook-like examples, something that would help the more mathematically challenged master the ideas of value-at-risk and correlation analysis. Small retail traders who trade only occasionally will probably find the risk metrics less compelling than larger, active traders or portfolio managers, though the basic principles emphasized in the last chapter certainly apply to any serious trader. Considering the absence of serious discussions of risk management in the popular trading literature, Trading Risk is a major contribution and a worthy addition to a library. I plan to use it as a core reading in our training program for new traders, perhaps the best endorsement I can give.


Rating:
Summary: A rare chance to learn real-life lessons from 1 of the best
Review: Ken Grant has succeeded in distilling his twenty-plus years of Risk Management experience at some of the world's top financial powerhouses into an excellent and concise book.

Ken is one of the few truly great characters of the investment world. I've been fortunate enough to have had the privilege of working with him and what he says is always worth paying attention to. In my ten years' experience trading for a diverse group of hedge funds, I've met very few who "get it" in the completely thorough way that Ken does.

The reader is treated to a straightforward, practical framework for implementing a risk management system that can be applied to any possible investing style and scale from ten thousand dollars to ten billion. Ken understands and explains that the reason for risk management is not only to reduce risk but also to enhance profitability. He acknowledges that in the real world there are costs to this, limits on the resources available and significant psychological hurdles to overcome. The book incorporates a great deal of everyday wisdom pulled from his extensive experience. In Ken's view: "risk management is much less about estimating and much more about doing".

Rather than focus on the relative merits of complex calculations that attempt to accurately measure the inherently unmeasurable, Ken provides a toolbox full of basic techniques for both measuring and managing risk. He gives sufficient detail to explain the features of the tools and doesn't waste time delving into the intricate details of calculations that are readily available within standard software. As Ken says: "the whole business of determining whether a distribution is normal or not gives me a headache".

His toolbox is extremely well organized. The core of the book gives a thorough analysis on how to apply these tools, the contexts in which the tools are helpful, and how to interpret and react to the results. This is risk management for traders, investment professionals and their managers, not just risk measurement for risk management departments of large institutions (although I'm sure they could learn plenty too).

Ken adds his own unique style to what could certainly be a dry subject by treating us to anecdotes from his professional life, his vastly knowledgeable opinions on rock music and some carefully selected and crafted stories from history.

It all adds up to a rare chance to learn from and get to know one of the giants of the investment world. Any trader, from a novice personal investor to a professional, should immediately put this easygoing and fascinating book on their must-read list.


Rating:
Summary: Most Useful Risk Management Book on the Market
Review: Ken Grant is a world-class risk manager and an entertaining, thought-provoking writer who has successfully intertwined his knowledge of performance-enhancing risk management techniques, human history, rock-and-roll wisdom and an engaging account of his own experiences and anecdotes as head of risk management/ Chief Investment Officer at some of the largest and most consistently profitable hedge funds in the nation.

This book is fascinating, insightful and fairly easy to read, but is also a highly detailed and practical tool for anyone seeking a blueprint for implementing Ken's own dynamic and adaptive risk management processes. Ken offers up valuable insights and methodologies along with case studies gleaned from his long and highly successful career at the epicenter of the hedge fund universe. Ken's wisdom and graceful writing style make it a pleasure to read this book on what can be a difficult and confusing subject. Trading Risk can help develop a discipline that fits your personal trading style and risk tolerance in a manner designed to elicit some control and order to the seemingly chaotic maelstrom of long/short equity trading. Reading and implementing some of the techniques in this book can help make you a better and more consistently profitable trader with lower volatility and less downside risk.

While there are quite a few books on this subject ranging from purely statistical/mathematical treatises to the "for Dummies" types, I found Grant's Trading Risk to be the most accessible for non quant types (like me) who want to be able to combine real-time risk monitoring with historical statistical trend analysis. This book teaches you how to do that, and does so in a way that is both easily understandable and immediately implementable - each chapter reveals increasingly sophisticated techniques that build on each other in succession, yet each may be utilized right away, so you don't need to finish the whole book before you can begin to benefit from it. It describes in plain English how to take your past performance and break it down, slice and dice it position by position overlaid against the broader market trends, gain insight from the "hows and whys" of your winners and losers and how to adapt your trading strategy accordingly.

In short, this is real-world stuff from a guy who has spent his entire career in the trenches with some of the smartest, toughest, most successful traders on the planet. In the hedge fund world a lot of investors made a great deal of money with just a couple of great years, and then either retired, blew-up or stagnated. Ken has thrived - since the birth of the modern hedge fund industry - by continually refining his approach. He is the real deal, and so is this book.


Rating:
Summary: Beware To Those Who Think They Know All About Risk!!!
Review: This book is fundamental to the understanding of the subject ... and will surely bring confidence to those potential "risk takers" out there who will no longer fear taking the leap based upon the knowledge Grant imparts. Trading Risk will most certainly cause anxiety with the "in's" and bring courage to the "out's" ..... nice work Grant ...

Rating:
Summary: Trading Risk by Kenneth Grant
Review: Unlike most financial authors, Grant has the highest credentials, having been entrusted by legends like Paul Tudor Jones and Steve Cohen to calculate risk on their billion dollar portfolios. Many traders ignore the subject of risk as too dry, even though it is far more important to trading success than buy and sell signals. Grant makes this argument well, and his advice about going against one's natural emotions during drawdowns is alone worth the price of the book. It is disrespect for risk that kills most traders (including professionals) - reading this book could save your trading career. I recommend reading it in conjunction with Taleb's 'Fooled by Randomness' to drive home the importance of measuring risk more conservatively than you might have imagined. Essential reading.