Exit strategies and quant trading - Knowing how firms deal with exits is critical
By: Mark Rzepczynski
Harvest Exchange
September 28, 2017
Exit strategies and quant trading - Knowing how firms deal with exits is critical
<img border="0" data-original-height="904" data-original-width="774" height="320" src="https://3.bp.blogspot.com/-qIL2x8DJyhI/WclVgRbbGnI/AAAAAAAALlQ/NR0F4DR3iv0u8pqxh-edbsScNOy-PSSqACLcBGAs/s320/Screen%2BShot%2B2017-09-25%2Bat%2B3.13.12%2BPM.png" width="273"/>
"If you're first out the door, that's not called a panic" - Margin Call (The Movie)
A panic only occurs if you are a late follower toward the exit. The panic occurs when you realize that the cost of exiting is higher than expected and liquidation is not moving as fast as expected. A trader can go through a mini-panic on a regular basis if an exit strategy is not planned correctly and there is a liquidity shortfall, Exit strategies are all about not panicking at those critical times, yet there are trade-offs between reducing panic and maximizing return. The control of exits as well as entries is a core issue with model building and drives incremental returns.
As firms get bigger the cost of entry and exit becomes higher and becomes a key source of differentiation across firms. For exits, leaving money on the table by leaving early may be more important than extracting the last value with the risk of a liquidity event.
<img border="0" data-original-height="1170" data-original-width="1600" height="468" src="https://4.bp.blogspot.com/-c43P2hBG16c/WczvFJQkhMI/AAAAAAAALmI/FsRfWlJQzFQWW1vggptsWBcO4CdJKnXpgCLcBGAs/s640/Screen%2BShot%2B2017-09-28%2Bat%2B8.45.07%2BAM.png" width="640"/>
Originally Published at: Exit strategies and quant trading - Knowing how firms deal with exits is critical