Project summary

CryptoMill - Stat Arb with Dynamic Hedging

• Hybrid strategy
• Stat arb like portfolio, but trades continuously using HF tech
• Limited position, allows approximate but robust risk model
• Instead of a pair of instruments, trades a wider set of diverse related instruments
• Trades frequently and has a high rotation
• Trades initiated based on observed small market inefficiencies in the market
• Does not immediately close the spread , keeps a small number of risk factors dynamically hedged
• Can always use the cheapest instrument at the moment
• Can overlay exogenous alpha signal on top of the risk model by biasing positions

• High correlations at most times but frequent idiosyncratic events
• Large crypto portfolios subject to a catastrophic loss, not attractive
• Disconnected markets, larger arbitrage opportunities than in traditional markets
• More competition, simple inter exchange arbitrage no longer working

• Relatively small portfolio of related assets and derivatives
• Quick turnover via “market making” (in HFT sense, participating via both quoting and aggressing)
• Dynamically hedged against main risk factors as in long short stat arb
• Effective multi asset arbitrage
• Additional alpha overlay, for example, a mean reverting behavior of the derivatives basis