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yuvaltaylor

We're looking into this. 

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last edit by
yuvaltaylor
at Jun 11, 2019 4:37:35 PM

yuvaltaylor

The excess cash is due to the inability of books to buy fractional shares. To simplify things, let's say you had two strategies, one of which bought only AAPL ($195.59) and the other of which bought only GOOGL ($1,094.61). Let's say each strategy started out with $50,000. Strategy A would leave $124.55 on the table and strategy B would leave $742.55 on the table. The total cash would be $867.10, or 0.87%. Now let's say you started a book with $50,000 cash that combined those two strategies. Since the amount in the book is significantly less than the amount in the two simulations combined, you'd get significantly more cash (percentagewise) in the book than in the two strategies. To be precise, you'd get $160.07 + $918.58 = $1,078.65, or 2.16%. I hope this makes sense! If not, let me know. 


jmh

Thank you Yuval. I understand and the maths check out. Indeed, if the book in your example was $200k, it would only be 0.22% left in cash (instead of 2.16% with a $50k book). In general the larger the book, the less issues like this. The annoying bit is that this process creates a gap from book simulations (which trade the equity curve of the underlying strategies) and, over time, it can lead to differing results... Not much can be done about it. I assume fractional shares for books are not on the todo list? Jerome 


