Explain the core concepts of risk management in quantitative trading and detail the application of different techniques like position sizing and stop-loss orders.

Risk management in quantitative trading is the process of identifying, assessing, and mitigating potential losses in a systematic and disciplined manner. It's a crucial aspect of successful trading because, regardless of how well a strategy is performing, there's always a possibility of losses due to market volatility, unexpected events, or model errors. Effective risk management aims to protect capital, prevent catastrophic losses, and ensure the long-term viability of a trading strategy. The core concepts revolve around understanding and controlling the various risks associated with trading. One of the core concepts is understanding different types of risk. Market risk is the risk that the price of an asset will change due to market fluctuations. This is the risk inherent in trading any financial asset, and is often controlled through diversification, hedging, and position sizing. Model risk is the risk that the quantitative model used for trading does not accurately reflect market behavior or has flaws in its logic. This risk can be controlled by backtesting, out-of-sample validation, and continuous monitoring. Operational risk is the risk associated with errors in the execution of trades, software glitches, or human errors in the trading process, which can be controlled through robust software architecture, automation, and proper error handling. Liquidity risk is the risk that a trader cannot sell an asset at its fair market price due to a lack of buyers, which is managed by avoiding illiquid assets, and being mindful of the trading volume. Counterparty risk is the risk that the other party in a transaction will fail to fulfill their obligations, such as a broker going bankrupt, which is often addressed by using established brokers and splitting the capital among different brokers. Position sizing is a fundamental risk management technique that determines the amount of capital allocated to a particular trade. The objective is to limit the potential loss on any single tr....