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The measure of a portfolio's return in excess of a benchmark's expected return for a given level of market risk.
The measure of a portfolio's return in excess of a benchmark's expected return for a given level of market risk.
Alpha represents the active return generated by a quantitative trading strategy relative to a benchmark index. Positive alpha indicates that the quantitative model or trader outperformed the benchmark after controlling for market risk (Beta).
Measures pure excess return independent of broad market movements.
In quantitative finance, alpha generation is the ultimate goal of systematic strategies.
Alpha decays over time as strategies become crowded or market efficiency increases.
Algorithmic trading is the use of computer programs to automate order generation, submission, and execution in financial markets. It spans systematic strategies (where the algorithm decides what to trade), execution algorithms (where the algorithm decides how to trade an existing decision), and high-frequency market-making. The defining feature is that a machine not a human produces and manages the orders.
Portfolio optimization is the construction of an asset allocation that maximises risk-adjusted return subject to investor constraints. The classical framework is mean-variance optimisation (Markowitz, 1952); the modern framework is factor-based, with the portfolio constructed to express a target set of factor exposures and to harvest the corresponding risk premia.