TRADERTALK
hedging strategy for FX exposures. For all investments vTrader FX makes use of cash or forwards within short-, medium- and long-term investment horizons. Building on the principle of capital preservation, vTrader FX takes directional and market-neutral positions. To guarantee liquidity vTrader FX invests only in high liquid G10 currencies and at the moment into 11 specific currency pairs.
What is vTrader technology based upon and where was it developed?
through quantitative analysis of the volatility and spot markets combined with discretionary filtering by the portfolio managers.
What makes the v-Pro strategy an interesting strategy for investors?
v-Pro focuses on volatility trading. 95% of the universe of currency programs just focuses on directional trading, hence making a bet whether a certain currency pair moves up or down. Hence v-Pro offers investors an additional dimension of diversification which they cannot achieve when allocating into different directional FX strategies. We view this as the main reason for the significant demand from institutional investors which we have experienced throughout the last two years.
Do your specialists have any bias towards short or long volatility?
Generally the fund has rather a net long volatility position than a short position. However in certain environments when we regard implied volatilities as too high, we may also run short volatility positions, both on gamma and vega levels. When we run short positions on these ‘greeks’ we typically run them via the use of exotic options in order to limit our maximal downside risk. Via that way that we buy options, the maximum loss is limited to the paid options premium.
The vTrader FX program is actively managed by Quaesta as a tailor made portfolio. What are the key objectives of this strategy?
vTrader FX is an actively managed systematic technological trading strategy with a live track record going back to September 2006. Investors use Quaesta´s vTrader FX strategy as FX Overlay, direct investments or as part of an actively managed currency
182 | april 2011 e-FOREX
Te vTrader technology is based on time series which are analysed and tested with Computational Intelligence methods. Specifically, vTrader develops evolutionary algorithms which replicate mechanisms of natural evolution by a computer program. Tus expert knowledge is acquired and complex tasks can be successfully solved which often cannot be handled by traditional optimization techniques.
In short, vTrader technology simulates a trading floor with virtual traders. Te trader’s tasks are to analyse their specific market, to identify profitable investment opportunities and to generate financial expert know- how. Te algorithms are no black box and are human readable.
vTrader has been developed and is continuously enhanced by Dortmund Intelligence Project GmbH (DIP) and the management of Quaesta Capital GmbH. DIP was founded by leading scientists at the University of Dortmund in cooperation with experts from the asset management industry. Tis company focuses on high technology solutions for financial markets. Dortmund Intelligence received the Technology Development Award of the state of Northrhine-Westfalia and of the German Federal Ministry of Education and Research in 2009.
What Risk Management frameworks do you run with vTrader?
Te risk management for the vTrader technology is based on independent strategies for each currency pair. Before entering a position, a stop-loss in the sense of price and time is set for each currency pair. Stop-loss and profit targets are continuously monitored. As soon as an investment exhibits a gain and specific targets are reached, the risk is reduced by adjusting the stop-loss. With high confidence vTrader will not sustain a daily loss that is larger than a fraction of the total risk. On portfolio view we have an overall weekly portfolio max limit. Te vTrader FX strategy is based on an intra-week horizon, this means we don´t hold market
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