Strategy lab / 151 Trading Strategies

Strategy lab

Every strategy from 151 Trading Strategies and all 101 Formulaic Alphas as formulas you can edit and backtest on ten years of daily stocks, ETFs, futures, forex and crypto data. Free, in your browser.

Options58

Stocks21

Exchange-traded funds8

Fixed income15

Indexes5

Volatility7

Foreign exchange6

Commodities6

Futures7

Structured assets6

Convertibles2

Tax arbitrage3

Miscellaneous assets4

Distressed assets7

Real estate8

Cash5

Cryptocurrencies2

Global macro4

Infrastructure1

11.4Structured assetsReference

Carry – tranche hedging

Buy a low-quality tranche and hedge it by selling a high-quality tranche in the ratio of their risky durations.

In the paper

Δ_{high} = \frac{D _{low}}{D _{high}}

Why there is no chart

CDO tranche spreads and risky durations.

The lab runs on daily prices for stocks, ETFs, indexes, futures, currencies, crypto and Treasury yields. This strategy from 151 Trading Strategies depends on data outside that set, so it is explained and formalised here rather than backtested.

Hypothetical backtests on daily closes with no slippage unless you add costs. Survivorship bias applies: the stock list is today’s large caps. For learning, not investment advice. Data: Yahoo Finance via yfinance.

Source: 151 Trading Strategies
Section: 11.4 · Structured assets
Asset class: Structured credit
In the lab: Explained, not backtested

Carry – tranche hedging (11.4)

Buy a low-quality tranche and hedge it by selling a high-quality tranche in the ratio of their risky durations.

Key equation

Δ_{high} = \frac{D _{low}}{D _{high}}

Data it needs

CDO tranche spreads and risky durations.

More in Structured assets

Source: Kakushadze, Z. and Serur, J. A. (2018). 151 Trading Strategies. Palgrave Macmillan. SSRN 3247865. Summaries are our own.