Portfolio Management System
"Toto, I have a feeling we are not in Kansas anymore."
– Dorothy, The Wizard of Oz
My first job in the hedge fund world was to build and maintain a Portfolio Management System (PMS) for a start-up hedge fund with less than $5 million under management. The principals believed that risk management was not some ornament of the business, but the business itself. Fast forward to now, and they are the dominant player in the Japanese alternative space. In this chapter, we will continue with our work from the last two chapters, and introduce a customized PMSÂ which shows risk visualization across the portfolio.
To illustrate the importance of a robust PMS, let's connect a few concepts we explored throughout this book. In Chapter 1, The Stock Market Game, we set the context that the market is an infinite, complex random game. In Chapter 6, The Trading Edge is a Number, and Here is the Formula, we unveiled the...
