The Arcane Mathematics Behind Renaissance's Medallion Fund

FINALLY REVEALED: the state-of-the-art mathematical techniques that drive the most successful quantitative investment fund in history of man.


Where It All Began...


I began my journey into quant trading when I learnt about Renaissance - the most successful quant hedge fund. I've spent the last 5 years actively looking for how RenTec does what it does.


Here's what I found.


Given how secretive Renaissance is about the inner workings of their strategies (they have very strict NDAs that they passionately enforce), I had to get creative.


I read every book, blog post, forum, and research paper (of employees) that could give insights into how RenTec trades.


I connected with and probed their staff (and of similar firms) over email and social media.


After collecting all the bits and pieces, and being fortunate enough to connect the dots (sometimes through intellect, sometimes through luck), I have finally figured it all out and replicated the Medallion.


So what is it that makes RenTec special?


The answer might shock you 🤯


The Math Behind Medallion


The fact that RenTec's initial success came from trading futures is well known as is the fact that their real breakthrough came in statarb in equities driven by Mercer+Brown.


But statistical arbitrage itself is not a new idea - many firms do it.


Statistical arbitrage, also referred to as statarb, is a computationally intensive style of quantitative trading that involves the simultaneous buying and selling of multiple financial instruments according to statistical models.


Many quant trading firms and hedge funds run statarb strategies, including DE Shaw, PDT Partners, Citadel, Millenium Management, Vatic Labs, etc.


But none of them have seen the success that RenTec's Medallion has because of one critical difference in how RenTec researchers model market data and the mathematics they use for it.


The real "alpha" of RenTec lies in...


.


.


.


.


.


.


.


.


.


.



Follow me on Twitter for such insightful content and my journey of struggling to make a living where a living is a billion dollars.


Cheers!

X