Event-driven trades often present attractive, time-limited opportunities but require disciplined construction to limit unintended duration or correlation risks. KRAT uses a checklist that captures catalyst clarity, time horizon, expected liquidity profile, counterparty considerations, and pre-defined exit rules. A conservative sizing model ties position size to expected price move, probability of execution within the time window, and the potential impact on portfolio volatility. Implementation is coordinated with operations to confirm settlement timelines and with compliance to ensure counterparty limits are respected.

Sizing and stop rules

Sizing begins with a notional cap as a percentage of the short-duration sleeve, then applies a trade-level stress that estimates loss under a worst-case slippage scenario. Stop rules are explicit and non-negotiable: they include absolute price thresholds, percent-of-book movement triggers, and time-based auto-exits if the trade fails to reach pre-defined liquidity milestones. These limits are coded into trade workflow systems where possible so execution teams receive automated alerts when thresholds are tripped.

Operational and settlement checks

Before sending a trade, operations verifies settlement counterparties, potential fails, and required documentation for the instrument. For corporate actions or tender-related trades, we confirm agent processing timelines and any transfer agent constraints. Pre-trade connectivity tests and a short checklist reduce operational surprises that can convert a time-boxed idea into an elongated exposure. After execution, reconciliations and post-trade reviews capture lessons on execution quality and settlement reliability.

KRAT's approach treats each event-driven trade as a project with clear planning, execution authority, and post-trade review so that the program learns and adapts without increasing hidden duration exposures.