FX FX MANAGERS
execution and back office reconciliation.
JW Which authorities regulate the company?
SH The FSA in the UK is the regulatory body.
currency
JW You are in charge of the program. How
SH Although
systematic concept
do
you describe your investment strateg y?
the in behind
program nature, the
is the Arktos
program is heavily based on the two principals over 50 years of collective trading experience and knowledge. This is particularly important in terms of what drives markets and the suitability of specific strategies at various points in the price cycle.
JW How did you create and
develop your current FX management strateg y? Has it changed over time, and if yes, for what reasons did you decide to change it?
SH The thesis behind the
strategy is largely unchanged since
inception. However, 54 FX TRADER MAGAZINE April - June 2012
SH It was decided from the outset
to operate with a fixed risk budget rather than VaR since we felt more
comfortable working
with absolutes rather than with probabilities. Each currency pair and therefore potential trade has a maximum volatility weighted risk allocation and the portfolio has a daily risk budget. Static entries reduce slippage risk on entry and gap risk is significantly reduced as a function of the strateg y’s operational time window and the fact that we carry no positions over the weekend. When the system’s risk filters intervene, headline and/ or individual pair risk may be reduced. Risk is never increased beyond the strateg y’s pre-determined maximum.
JW Do you use a blend of strategies or one only?
SH Arktos has one principal
SH Our ideal market would
involve a degree of directional bias but regardless of volatility conditions either generally or for a specific currency pair. Less favourable environments for the program are range bound markets with upper or lower boundary closes; under these
conditions the program
automatically seeks to reduce risk.
JW Can you give us an example of
a memorable winning trading decision?
SH We decided not to trade the day
after the ‘Flash Crash’ in May 2010, EURJPY having had a 10 big figure range day. Volatility
the adaptability of the core model has been the key to its durability. Additionally a large amount of time has gone into the implementation of a number of risk filters designed specifically to limit volatility at both the portfolio and level.
individual pair
JW How do you manage risk in the
company?
strategy overlaid with a number of additional risk models, which were developed to allow the necessary adaptive flexibility to operate as currency market characteristics change. Using the same principles, we have further G10 pairs under live trade analysis, which will allow for positive diversification and add to scalability.
JW What
are the challenging , market
conditions that you consider ideal, and which ones are the most
for the performance of your strateg y?
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