Risk engine equity5/17/2023 ![]() ![]() This additional control measure does not allow the D-Leverage of any DARWIN to exceed in any case the following thresholds: While the trader's position remains open in the market, the Risk Engine ensures that the position does not go above the maximum leverage. The Risk Engine works on two levels First levelĮvery time a trader sends a market order and depending on the market conditions at that moment in time, the algorithm calculates the size to be opened for the investors in order to meet the target risk level that Darwinex guarantees all its investors. *This ratio is updated once an hour on the platform. On the other hand, if the VaR Ratio is 0.5, it means that the DARWIN is trading with half the leverage when compared with the underlying trading strategy. VaR Ratio* is the leverage ratio between a DARWIN and an underlying strategy.įor instance, if the VaR Ratio is 2, it means that the DARWIN is trading with leverage of 2 times higher than the underlying trading strategy. In summary, the Risk Engine tolerates changes in VaR of up to 2 times (up or down) with the aim to better adapt to how the trader manages its risk.ĭARWIN managers can check both their current target VaR value and the VaR ratio in the Asset Management section. Lastly, this ratio gets multiplied by 6.5%, resulting in a VaR that will move between 3.25% - 6.5%. Then, the current VaR of the DARWIN is divided by the maximum VaR calculated before. Should the DARWIN never exceed this 2:1 ratio in the last 6 months, Darwinex will take into account the last 6 months. To determine the DARWIN's target VaR, historical VaR data is taken into account, starting with the most recent data with a look-back window of 6 months max, until the ratio between the maximum and minimum VaR is 2:1. The formula of the Risk Engine Lev (investor) = Lev (trader) * (target VaR/strategy VaR)*fĪs a reference period and, in order to evaluate the underlying strategy's value at risk (VaR), the algorithm uses the last 45 days in which the trader has remained exposed to the market. Provide traders with the legal coverage so they can earn performance feesĭarwinex provides all its traders with legal coverage so they can earn a 15% performance fee of the profits generated by investors who invest in the DARWIn that's based on their trading strategy. The risk manager adds an extra layer of security protecting our investors' capital from any erratic or irrational behaviour by the provider in terms of their risk management. Add an extra layer of security to our investors Standardise the riskĪll DARWINs have a similar statistical risk level and their risk oscillate in between a monthly 3.25 and 6.5% VaR, equivalent to that of an equity index. We fulfil our obligations as an Asset Manager regulated by the FCA (UK) providing our investors with an asset whose risk they know beforehand. Thanks to the Risk Engine Darwinex reaches the following goals: 1. The risk engine is the mechanism that lies in between the underlying strategy and the DARWIN, and regulates the investors' risk making sure that the target risk of all DARWINs is the same, 6.5% monthly VaR. How the Risk Engine works The Darwinex Risk Engine is an algorithm that manages the risk of DARWINs independently of the risk taken by the trader. ![]()
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