Quantitative risk management
Volatility is only an imperfect proxy for risk. These articles focus on what actually matters to capital: how deep losses go, how long they last, and the position size that lets you survive them.
Risk-adjusted ratios, drawdown and time underwater, VaR and CVaR, Monte Carlo simulation and position sizing: each concept is presented with its limitations, never as a guarantee.
Sortino Ratio vs Sharpe Ratio: Which One Should You Use?
The Sortino ratio fixes a major flaw in the Sharpe ratio by penalizing only downside volatility. Comparison, calculation, and a worked example.
Value at Risk (VaR) Explained: Measuring a Portfolio's Loss Risk
Value at Risk is one of the most widely used risk metrics in finance. How to calculate it, what it actually tells you, and why it doesn't tell you everything.
Portfolio correlation: why your diversification may be illusory
Holding twenty positions isn't enough to diversify a portfolio if they all move together. Here's how to measure real correlation between your assets, and why it spikes exactly when you need diversification most.
Fractional Kelly in practice: taming the optimal formula
The Kelly criterion is optimal in theory and ruinous in practice. Here's why, and how to fraction it to build position sizing that survives real-world uncertainty.
Calmar Ratio: Evaluating a Strategy by Its Worst Drawdown
The Calmar ratio compares annualized return to the worst observed drawdown. A blunt but telling metric, with its strengths and limitations.
Maximum Drawdown: Why Psychology Matters More Than the Number
A 25% maximum drawdown looks acceptable on paper. In practice, it's often exactly where traders give up. Here's why, and how to prepare for it.
Position Sizing: Alternatives to the Kelly Criterion
Fixed, fractional, volatility-based, or the 2% rule: a tour of position sizing methods beyond the Kelly criterion.
Omega Ratio: A Compelling Alternative to Sharpe
The Omega ratio uses the entire return distribution instead of just mean and variance. Explanation, a worked example, and the limitations of this underused measure.
Sharpe Ratio vs Sortino Ratio: Formulas and When to Use Each
A rigorous comparison of the Sharpe and Sortino ratios, with formulas, Python code, and a clear framework for choosing the right risk-adjusted metric.
Monte Carlo Simulation for Trading Strategies in Python
Learn how Monte Carlo simulation in Python reveals the true drawdown risk of a trading strategy beyond a single historical backtest path.
The Kelly Criterion in Trading: Formula and Fractional Sizing
The Kelly criterion formula explained: derivation, why full Kelly fails under real-world fat tails, and why fractional Kelly sizing is used instead.
How to Calculate Maximum Drawdown and Time Underwater in Python
Learn to calculate maximum drawdown and time underwater in Python with pandas, including a complete script, plots, and why duration matters as much as depth.