Starting with a fully invested A-share portfolio to become a capital...

Chapter 23 Breaking into the Top Fifty
In the afternoon.

Because investment students need to trade stocks, the latest class schedule starts at 3:15 pm.

A university class is 90 minutes long. If you have two classes, the second get out of class ends at 6:30 pm.

get out of class ending at this time is actually just right; I can have dinner before going back to the dorm.

Because he had bet on the right stock, Zhang Yang basically ignored the stock market, only glancing at Lai Weijie's demo account near the close of trading.

Lai Weijie's demo account had 100% of its funds invested, and the total profit was 14.93, corresponding to a total return of 14.93%.

If the 35% increase is averaged over the remaining 12 trading days, then a stable daily increase of 2.91% is all that's needed to achieve the 50% return target.

Although 50% is not a hard and fast rule, it is enough to secure a place in the top ten.

[Zhang Yang]: The market has closed.

Although Zhang Yang and Lai Weijie had a disagreement, Lai Weijie was, after all, a major investor, so he still sent Lai Weijie a notification message as usual at the close of trading.

Not a moment.

The other party replied.

[Lai Weijie]: I saw it.

[Lai Weijie]: Please forgive my impetuousness today, Brother Yang. I apologize to you. I'm sorry.

Lai Weijie truly didn't expect that speculative funds would be so ruthless, driving the stock to its daily limit down at the opening bell and then pulling Changan Automobile back up to its daily limit up.

He couldn't help but marvel at how Zhang Yang's theoretical knowledge, market understanding, and trading skills were indeed several times, or even dozens of times, stronger than his own.

[Zhang Yang]: It's all in the past.

Zhang Yang wouldn't dwell on such trivial matters, because he and Lai Weijie were partners, and theoretically, they wouldn't have any further contact after the partnership ended. He didn't need to get angry about it.

……

After unplugging the network connector, Zhang Yang took his laptop to class.

The two afternoon classes are "International Investment and Risk Management" and "Financial Modeling and Quantitative Analysis".

Because it was my senior year, the course "International Investment and Risk Management" had already covered the VaR risk model to prevent people from "jumping off buildings".

What is the VaR risk model?

This is a quantitative risk management tool that measures the maximum potential loss of a financial asset or portfolio at a specific time and confidence level.

Its computational models are mainly divided into three types, namely…

1. Historical simulation method.

The principle is to use historical data to directly simulate future risks.

The operation is relatively simple: collect the return data of A-shares over the past year, sort the returns from the largest loss to the largest profit, determine the percentile, and then multiply the return by the current asset value to obtain the absolute loss amount.

The advantage is that it is simple and intuitive, and does not require assumptions about the distribution. The disadvantage is that it relies on historical data and cannot predict new risk events.

Many stock investors look at historical trends to roughly judge the bottom and top of a stock, which is actually the historical simulation method.

2. Covariance method.

The principle is to assume that the asset return rate follows a normal distribution and calculate the risk using the mean and variance (standard deviation).

The specific steps involve calculating the average and standard deviation of historical returns, determining the quantiles corresponding to the confidence level, and then calculating VaR.

The advantage is that it is quick to calculate, but the disadvantage is that it relies heavily on the assumption of a normal distribution and may underestimate extreme risks.

3. Monte Carlo simulation method. This is known as the "miracle by brute force" method. The specific principle is to use computers to randomly simulate the future path of asset prices and generate a large number of possible return distributions.

The advantage is that it can handle complex distributions and nonlinear relationships, while the disadvantage is that it requires a large amount of computation, needs to be implemented in programming, and depends on the reasonableness of the model assumptions.

Three calculation models can help investors understand potential risks.

The biggest difference between professional traders and ordinary retail investors is that the former are good at using various tools to avoid the risks brought by the stock market, while the latter are more emotional.

Of course.

VaR risk models are not a panacea; they can only give you a general understanding of the risks involved.

Even the most skilled traders can lose money if a black swan event occurs.

The curriculum arrangement of Shanghai University of Finance and Economics is also quite meaningful. Risk control is only taught near graduation, as if they are afraid that their students will suffer a margin call and commit suicide.

……

As for the second lesson, "Financial Modeling and Quantitative Analysis," in short, it involves building mathematical models and using quantitative methods for investment analysis and decision-making.

In layman's terms, it means using mathematical models to calculate future price fluctuations, such as the ARIMA model (autoregressive integral moving average model) and the GARCH model (generalized autoregressive conditional heteroscedasticity model).

As for quantitative models, VaR is a defensive quantitative model, and it also includes trend-following models, statistical arbitrage models, and high-frequency trading models.

Zhang Yang was already very familiar with these two courses, and he was also proficient in using various model trading methods. However, due to limited resources, he was unable to build a strategy.

While the teacher was tirelessly imparting knowledge on stage, class monitor Lin Tian had already sent the rate of return table for April 6th to the QQ chat group "Investment Studies 122 King Kong".

First place: He Jing 44.7%
Second place: Yin Shichang 39.6%
Third place: Dong Lulu 38%
……

Ninth place: Lu Lixuan 32.2%
10th place: Jia Pei 30.8%
Compared to last week's closing gain of 42.8%, He Jing has gained another 1.9%, bringing her one step closer to the 50% return mark.

For some reason, Xu Jiafeng, who was second last week, saw his return rate drop by 4.9%, dropping directly to fifth place.

Yin Shichang, who was originally in ninth place, achieved a return of 6.74%, soaring to second place and closing in on He Jing.

In the daily return ranking at the bottom of the statistics document, Lai Weijie stands out with a return of 10%, and his overall ranking has also squeezed into the top forty.

At this point, Lai Weijie had become the focus of discussion in the QQ chat group.

[Yin Shichang]: Lai, what did you buy? 10% return, all in one position and it hit the daily limit, that's a bit exaggerated!
[Chen Xiaohua]: From a negative return rate, you've made it all the way into the top 50 in your field. Lai Weijie, you've been hiding your true talent!

[Xu Zhiruo]: Awesome!
[Wang Liu]: Did you take Viagra? That's powerful!
The class group chat was buzzing with messages. For the first time, Lai Weijie felt the thrill of being admired and quickly typed a reply to his classmates.

[Lai Weijie]: I originally wanted to give up, but I was probably lucky and bought a stock that hit the daily limit. I was just lucky.

[Wang Lei]: You're too modest. If I remember correctly, Lai Weijie, you're a native of Shanghai. You must have soared to great heights after graduation, right?

[Zhang Dai]: Hu-ye, please protect me!

[Bai Shanshan]: I want to talk to Mr. Hu.

Seeing the constant stream of messages, Lai Weijie remained modest.

He knew very well that the achievement was not his work, but rather written by Zhang Yang. In fact, he could only repeatedly be modest to avoid being exposed.

Lai Weijie's rise in rankings also caught He Jing's attention.

She still remembered that last week, Lai Weijie specifically sought out Zhang Yang, and while he was distracting her, the two of them talked about something.

Looking at today's returns...

"Could it be that the two of them reached some kind of deal?" He Jing felt increasingly uneasy and glanced at Zhang Yang in the third row. At this moment, the latter was completely focused on typing on the laptop keyboard, as if he always had something to do.

(End of this chapter)