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Brain training

Published in Automated Trader Magazine Issue 22 Q3 2011

Peter Wiesing is founder and CEO of Global Arbitrage Group. He has a background in brain research, a track record in the successful application of machine learning to futures markets, and ambitions to get into hedge funds and HFT. Andy Webb went to meet him.

Peter WiesingAndy Webb: Let's start with your background. How did you get into this business?

Peter Wiesing: I spent a lot of time in college studying. I have a diploma in theoretical physics, but then switched to theoretical neuroscience for my masters at the Salk Institute in La Jolla. It was basically brain research. I then did a Phfare retD in the same subject at MIT in cooperation with a German university. From there, I went to business school and did a PhD in finance and capital markets. It was a lot of work, I can tell you!

Andy Webb: Is there a strong relationship between the neuroscience and much of what you do now?

Peter Wiesing: No. However, it is critical to hire people in the quant business who have applied maths, which gives you a lot of experience in applying statistical models - which you also get if you do neuroscience or theoretical physics. It is not important to study neuroscience in itself.

Andy Webb: When did you found Global Arbitrage?

Peter Wiesing: Right after the second PhD. The name comes from the first strategy we implemented and traded with our own money - a million Euros - at the end of 2006. It was a stat arb strategy. We developed models for pricing options, especially equity index options, and traded them on all global markets on an intraday basis in a quiet, quick way.

We are happy with the strategy so far. We benefited from the high volatility in 2008/2009 and markets remain volatile. However, I do not believe that our returns in a low volatility market such as 2004 would be as strong as they have been recently.

We did try to switch from a research and prop trading company into the hedge fund market in 2007, but it was a bad time. We had good numbers but all our seed investors withdrew. This is why we decided to concentrate on advisory work and risk management for institutional investors, mainly in Germany and the Netherlands. We have offices in both these places. We advise, not only in the fixed-income world, but the equity world too.

But we also have a few managed accounts from family and friends where we trade stat arb and overlay strategies, i.e. trading futures to hedge risks in a long only portfolio. Since the hedge fund industry shows stable growth again it is now time for us to get back into the hedge fund world, with a derivatives fund under the umbrella of a managed futures fund. We intend to start with a classical but very innovative managed-futures strategy, all proprietary.

Andy Webb: With the managed accounts is that mostly options or have you introduced a trial for your managed futures idea?

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