Quantifying the risk

Now, let's get started with understanding what realistic risk constraints look like and how to quantify them. We will list, define, and implement some of the most commonly used risk limits in the modern algorithmic trading industry today. We will use the volatility adjusted mean reversion strategy we built in Chapter 5, Sophisticated Algorithmic Strategies, as our realistic trading strategy, which we now need to define and quantify risk measures for.

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