QFS Asset Management – taking a unique view on the business of managing money >>>
Te second objective we try to accomplish is to implement our conclusions about fundamental investing in as consistent, disciplined and objective way possible. Armed with explicit equations expressing our views about expected asset returns, we use technology to automate the implementation of our investment ideas. Each Investment Program at QFS uses a fully integrated system consisting of several computing modules (subsystems). Te major component systems focus on expected return calculations, risk assessments (variance/co-variance matrix), a dynamic portfolio optimization approach (find the trading plan that maximizes expected return subject to risk levels) and a drawdown control system designed to reduce risk (positions) subject to the level of drawdown. All elements – expected return forecasts, correlations/ volatilities, portfolio optimization and drawdown control – operate in real time and incorporate live data feeds and continually readjust the positions suggested by the model as influenced by changing conditions.
How do you go about back-testing your proprietary currency trading systems and signals to confirm that your strategies will perform as required and will remain relevant to the long term trading goals and performance criteria of the firm?
Jim: Once a quarter on every model, the QFS research team runs statistical tests to review the models’ statistical consistency.
Karlheinz: QFS’s trading systems constitute an integrated network of programs for research, statistical analysis, testing and simulation, data collection, portfolio optimization, risk management and accounting. QFS’s trading systems operate in real time, integrating information from real-time data feeds, performing portfolio valuations, optimizations and associated trades.
In this edition of e-Forex we have examined the development of Machine Readable News and how the next generation of FX algorithms are now being designed to more effectively capture the power of the news. How does QFS go about exploiting real-time insights that are embedded within market and economic data?
Jim: Te area of machine-readable news is fascinating and is something we are following. Historically our focus has principally been on modelling macroeconomic fundamentals with a fairly long time horizon, again, with models based on fundamental hypotheses. Nevertheless, our real-time trading
system’s optimization design naturally lends itself to aggregation with higher frequency signals and there are theories of market micro-structure that might combine well at the frequencies machine-readable news work for.
To what extent have you developed research agendas and analytical programmes to help improve the design of new trading strategies and to maintain the performance of your existing investment processes?
Te Investment Committee oversees the operation and performance of the trading systems. Te Committee draws on information from markets directly, analysis from the research group, and feedback from the execution desk. At least quarterly, the Committee makes decisions to modify parameters governing the trading system (e.g. tolerance to portfolio risk), makes decisions governing non-trading system related factors (e.g., counterparty selection), or manages contingencies unforeseen that prevent the trading system from generating executable signals (e.g., emergency closure of markets).
To support a consistent, disciplined application of each trading strategy, investment decisions are made by the models. Members of management and trading monitor the accounts during the trading day to ensure that exposures and risk guidelines are being maintained. Ongoing improvements to the models are made under the direction of our research team of five PhDs (including Dr. Grossman and Dr.
Conklin). In addition, a four-person technology team assists in the implementation of the research effort. A staff of five traders, led by a Director of Trading, executes the trades that are indicated by the model (trading occurs 24 hours a day, five days a week). Te trade execution group has authority for overseeing the implementation of the trades and has limited discretion related to the timing of execution
How much reliance does QFS place on the latest automated trading tool-sets and execution algorithms to help you better manage risk, optimize trade execution pathways and meet your investment objectives?
Jim: Our proprietary trading system incorporates dynamic programming techniques to optimally enter/ exit trades while minimizing long-run transaction costs in real-time. Once signaled by the model, trades are executed by the trading desk on a best-execution basis, and generally are completed within a given
july 2012 e-FOREX | 163
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140 |
Page 141 |
Page 142 |
Page 143 |
Page 144 |
Page 145 |
Page 146 |
Page 147 |
Page 148 |
Page 149 |
Page 150 |
Page 151 |
Page 152 |
Page 153 |
Page 154 |
Page 155 |
Page 156 |
Page 157 |
Page 158 |
Page 159 |
Page 160 |
Page 161 |
Page 162 |
Page 163 |
Page 164 |
Page 165 |
Page 166 |
Page 167 |
Page 168