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ALT-FX
has long-term portfolio maintenance with five levels
of risk
control:
- Portfolio/NAV leverage
confirmation/dynamic de-leveraging at fund level akin to partial
portfolio protection based on quantitatively modelled drawdown
and fund volatility thresholds as per CPPI (Constant Portfolio
Protection Insurance)
- Exposure aggregation by cluster
risk and long-term correlation adjusted risk
- Trade entry/exit stop losses
based on non-linear quantitative analysis
- Aggregate, 100% correlated risk
to stop typically < 3.5%
- Capital allocation adjustments
per strategy and target achievement—i.e. scale out
Risk triggers are based on a 99.5%
confidence stress test and annual reset of the NAV back to par. The
targeted leverage of the fund on a gross positions basis is between
4 and 8 times, depending upon historic stress testing/ volatility.
The actual average risk adjusted leverage equates to 3 times capital
on a value at risk basis.
ALT-FX has a unique approach to risk
quantification/management through the use of:
- Overnight and 10 day individual
trade “short circuits” based on discrete observed movement
distribution “fat tails”
- Overnight and 10 trading day
intervals on each risk reflecting return asymmetries
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