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Masterclass

Masterclass Case Study: A CIO's Post Mortem on a Failed Quant Strategy

A full-length case study for senior quants, systematic fund manager aspirants and prop desk leads. You sit in the CIO's chair at Tapti Quant Capital, a hypothetical SEBI Category III AIF whose residual momentum and quality long-short book in Indian mid and small caps went live in mid 2024 on the back of a Sharpe 2.1 backtest, then lost 31% as the momentum and smallcap trade unwound between October 2024 and March 2025. Across ten chapters you run a blameless post-mortem: reopen the research that got approved, rebuild the backtest honestly with deflated Sharpe ratios and point-in-time NSE data, dissect the risk model, crowding, hedging and liquidity assumptions, reconstruct the drawdown week by week, audit execution and model governance, and examine the people and incentive failures behind the numbers. The case is tested against LTCM, the 2007 quant quake, the 2009 momentum crash and Indian market shocks, and the course closes with the CIO's written remediation plan and a pre-mortem and strategy health playbook you can run on your own systematic book.

Quant Strategy FailurePost-Mortem AnalysisBacktest OverfittingDeflated Sharpe RatioFactor CrowdingMomentum CrashesRisk Model FailureLiquidity RiskModel GovernanceCategory III AIFDrawdown ManagementPre-Mortem

MODULES

10

DURATION

~7 hrs

TRACK

Quantitative Finance

What You'll Master

Run a structured, blameless post-mortem on a systematic strategy and separate bad luck from bad process

Detect overfitting with multiple-testing adjustments, the deflated Sharpe ratio and honest holdout design

Spot survivorship, look-ahead and regime biases in Indian equity backtests built on NSE and BSE data

Explain how crowding, covariance breakdown and imperfect hedges turn a 9% volatility book into a 31% drawdown

Measure liquidity and capacity risk in mid and small caps using impact cost and days-to-liquidate

Decide when to cut risk or pull the kill switch using pre-agreed, written criteria

Diagnose the governance, incentive and investor communication failures that sit behind quant blow-ups

Write a remediation plan, a pre-mortem and a live strategy health dashboard for your own systematic book

Access Level

LEARNER

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Everything included

Full Text Playbooks

Actionable Exercises

Mobile Reading Mode

Lifetime Updates

Curriculum Breakdown

Chapter 1: The Case and the Post-Mortem Method

4 Lessons

Why Post-Mortems Teach More Than Backtests9 min read

Meet Tapti Quant Capital: The Fund, the Strategy and the 31% Drawdown11 min read

The Blameless Post-Mortem: Timeline, Evidence and Root Causes11 min read

Outcome Bias and Hindsight: Separating Bad Luck from Bad Process10 min read

Chapter 2: The Strategy on Paper: The Research That Got Approved

4 Lessons

The Original Thesis: Residual Momentum Plus Quality in Indian Mid and Small Caps12 min read

The Backtest That Sold It: A Sharpe of 2.1 and What It Hid12 min read

Rereading the Investment Committee Memo with Fresh Eyes10 min read

Capacity, Turnover and Cost Assumptions Nobody Challenged11 min read

Chapter 3: Research Failures: Overfitting and Data Sins

4 Lessons

Multiple Testing and the Deflated Sharpe Ratio13 min read

Survivorship, Look-Ahead Bias and Point-in-Time Data on NSE Universes12 min read

Regime Dependence: The 2020 to 2024 Smallcap Bull Run as a Hidden Factor11 min read

Rebuilding the Backtest Honestly: What the Real Expected Sharpe Was13 min read

Chapter 4: Portfolio Construction and Risk Model Failures

4 Lessons

Crowding: When Every Momentum Book Owns the Same 40 Stocks11 min read

The Risk Model Said 9% Volatility: Covariance Estimation Under Stress13 min read

Leverage, Gross Exposure and the Hedge That Was Not a Hedge12 min read

Liquidity Risk: Impact Cost and Days to Liquidate in Small Caps11 min read

Chapter 5: The Blow-Up: Reconstructing the Drawdown

4 Lessons

The First Signals and Why They Were Explained Away10 min read

The Crash Weeks: Momentum Reversal, Price Bands and Forced Selling12 min read

Redemptions, Margin Calls and the Liquidity Spiral11 min read

The Kill Switch Decision: When and How the CIO Stopped Trading11 min read

Chapter 6: Execution, Infrastructure and Operational Failures

4 Lessons

Slippage Decomposition: Backtest Fills vs Live Fills12 min read

Broker APIs, Order Management and SEBI's Algo Trading Framework11 min read

Model Governance: Version Control and the Untested Patch11 min read

Knight Capital and Other Operational Failures Worth Studying10 min read

Chapter 7: Governance, People and Incentives

4 Lessons

The Researcher, the PM and the CIO: Who Actually Owned the Risk10 min read

Incentives: Performance Fees, Launch Pressure and Asset Gathering10 min read

Talking to Investors During a Drawdown: What Tapti Got Wrong10 min read

The Fiduciary and Regulatory Lens: Category III AIF Obligations11 min read

Chapter 8: Quant Failures Compared: Lessons from History

4 Lessons

LTCM 1998: Leverage and Correlations Going to One11 min read

The August 2007 Quant Quake: Anatomy of a Crowded Unwind11 min read

The 2009 Momentum Crash and Momentum's Fat Left Tail11 min read

Indian Shocks: March 2020, Smallcap Froth and Market Structure Changes12 min read

Chapter 9: Rebuilding: The CIO's Remediation Plan

4 Lessons

Writing the Post-Mortem Report: Findings, Root Causes and Actions11 min read

Redesigning the Research Pipeline: Pre-Registration, Holdouts and Kill Criteria12 min read

Risk Overlays That Would Have Changed the Outcome12 min read

Relaunch, Rebuild or Shut Down: Making the Final Call10 min read

Chapter 10: Your Own Post-Mortem Playbook

3 Lessons

The Pre-Mortem: Killing a Strategy Before It Goes Live10 min read

Building a Live Strategy Health Dashboard12 min read

Capstone: Run a Post-Mortem on Your Own Strategy13 min read