Inside The Black BoxThe Simple Truth About Quantitative TradingRishi K NarangPraise forInside the Black Box"In Inside the Black Box: The Simple Truth About QuantitativeTrading, Rishi Narang demystifies quantitative trading. Hisexplanation and classification of alpha will enlighten even aseasoned veteran."?Blair Hull, Founder, Hull Trading & Matlock Trading"Rishi provides a comprehensive overview of quantitativeinvesting that should prove useful both to those allocating moneyto quant strategies and those interested in becoming quantsthemselves. Rishi's experience as a well-respected quant fund offunds manager and his solid relationships with many practitionersprovide ample useful material for his work."?Peter Muller, Head of Process Driven Trading, Morgan Stanley"A very readable book bringing much needed insight into asubject matter that is not often covered. Provides a framework andguidance that should be valuable to both existing investors andthose looking to invest in this area for the first time. Manyquants should also benefit from reading this book."?Steve Evans, Managing Director of Quantitative Trading, TudorInvestment Corporation"Without complex formulae, Narang, himself a leadingpractitioner, provides an insightful taxonomy of systematic tradingstrategies in liquid instruments and a framework for consideringquantitative strategies within a portfolio. This guide enables aninvestor to cut through the hype and pretense of secrecysurrounding quantitative strategies."?Ross Garon, Managing Director, Quantitative Strategies, S.A.C.Capital Advisors, L.P."Inside the Black Box is a comprehensive, yet easy read. RishiNarang provides a simple framework for understanding quantitativemoney management and proves that it is not a black box but rather aglass box for those inside."?Jean-Pierre Aguilar, former founder and CEO, Capital FundManagement"This book is great for anyone who wants to understand quanttrading, without digging in to the equations. It explains thesubject in intuitive, economic terms."?Steven Drobny, founder, Drobny Global Asset Management, andauthor, Inside the House of Money"Rishi Narang does an excellent job demystifying how quantswork, in an accessible and fun read. This book should occupy a keyspot on anyone's bookshelf who is interested in understanding howthis ever increasing part of the investment universe actuallyoperates."?Matthew S. Rothman, PhD, Global Head of Quantitative EquityStrategies Barclays Capital"Inside the Black Box provides a comprehensive and intuitiveintroduction to "quant" strategies. It succinctly explains thebuilding blocks of such strategies and how they fit together, whileconveying the myriad possibilities and design details it takes tobuild a successful model driven investment strategy."?Asriel Levin, PhD, Managing Member, Menta Capital,LLC

Preface.Acknowledgments.Part One The Quant Universe.Chapter 1 Why Does Quant Trading Matter?The Benefit of Deep Thought.The Measurement and Mismeasurement of Risk.Disciplined Implementation.Summary.Chapter 2 An Introduction to Quantitative Trading.What is a Quant?What is the Typical Structure of a Quantitative TradingSystem?Summary.Part Two Inside the Black Box.Chapter 3 How Do Quants Make Money?Answer: Alpha Models.Types of Alpha Models: Theory-driven and Data-driven.Theory-Driven Alpha Models.Data-Driven Alpha Models.Implementing the Strategies.Blending Alpha Models.Summary.Chapter 4 Risk Models.Limiting the Amount of Risk.Limiting the Types of Risk.Summary.Chapter 5 Transaction Cost Models.Defining Transaction Costs.Types of Transaction Cost Models.Summary.Chapter 6 Portfolio Construction Models.Rule-Based Portfolio Construction Models.Portfolio Optimizers.Output of Portfolio Construction Models.How Quants Choose a Portfolio Construction Model.Summary.Chapter 7 Execution.Order Execution Algorithms.High Frequency Trading: Blurring the Line between Alpha andExecution.Trading Infrastructure.Summary.Chapter 8 Data.The Importance of Data.Types of Data.Sources of Data..Cleaning DataStoring Data.Summary.Chapter 9 Research.Blueprint for Research: The Scientific Method.Idea Generation.Testing.Summary.Part Three A Practical Guide for Investors in QuantitativeStrategies.Chapter 10 Risks Inherent to Quant Strategies.Model Risk.Regime Change Risk.Exogenous Shock Risk.Contagion, or Common Investor, Risk.How Quants Monitor Risk.Summary.Chapter 11 Criticisms of Quant Trading: Settingthe Record Straight.Trading is an Art, Not a Science.Quants Cause More Market Volatility by Underestimating Risk.Quants Cannot Handle Unusual Events or Rapid Changes in MarketConditions.Quants are All the Same.Only a Few Large Quants Can Thrive in the Long Run.Quants are Guilty of Data Mining.Summary.Chapter 12 Evaluating Quants and Quant Strategies.Gathering Information.Evaluating a Quantitative Trading Strategy.Evaluating the Acumen of Quantitative Traders.The Edge.Evaluating Integrity.How Quants Fit into a Portfolio.Summary.Chapter 13 Looking to the Future of Quant Trading.Notes.About the Author.Index.