Design for Assembly:
Design for assembly is a borrowed methodology from Mechanical Engineering that relies more in the synergies of different simple components of a holistic structured system instead of relying on single hyper complex model. As a results, it provides easy control, robustness and adaptivity to different market conditions.
This is the necessary approach to solve the infamous problem of risk management being orthogonal to the alpha model.
Risk Management aligned to Alpha:
Integrated dynamic stop losses are underrated because difficult to be implemented in complicated Machine Learning models.
Exogenous Risk Limits being activated too late, because not integrated in the alpha process, can exacerbate the bad performance because preventing the recovering of the strategy.
On the contrary, in our case because of the modular portfolio construction derived from the Design for Assembly approach, it is straightforward to align the risk management to each alpha signal component. Our Risk Management is endogenous to the system and ex ante.
As result, our stop losses are effective and crucial for the all system functionality.
Stop loss at work:
During the market crash -10% on Monday the 5th of August 2024 the strategy lost only 26bps with 3 Long Only trades.
This was fundamental for the strategy to adapt to the new market conditions and to prepare to gain in the new market conditions.
The Alpha Generation Process:
is composed not by a single supermodel but by many different signals triggered in sequence to achieve the same goal, like a chess strategy.
Grey Swan Risk Advisors Strategy: an Innovative methodology beyond common quant strategies
COntact
Disclaimer
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
This website contains information about Grey Swan Risk Advisors Ltd (“Greyswanrisk”), its employees, and the historical performance of trades related to the Greyswanrisk Technology Strategy. This information is provided solely to illustrate the expertise of the individuals involved and should not be interpreted as a guarantee of future performance.
Any target return figures are indicative only, based on long-term projections and prevailing market conditions at the time of modelling. These are subject to change and should not be relied upon for investment decisions.
Case studies and historical examples are for illustrative purposes only. They do not represent actual or expected performance and should not be assumed to be profitable or loss-free. Market conditions change and similar opportunities may not be available in the future.
Greyswanrisk does not guarantee capital protection. Investments in the Strategy may involve a significant degree of risk, including the potential loss of the entire amount invested. Investors must ensure they meet the suitability requirements and should seek independent financial, legal, and tax advice before making any investment decisions.
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