EXANTE Cross-Asset Portfolio Margin Risk Calculation for Hedge Funds Trading

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EXANTE Cross-Asset Portfolio Margin Risk Calculation for Hedge Funds Trading

  1. 1. February 2013EXANTECROSS-ASSET PORTFOLIO MARGINRISK CALCULATION for HFTSergey Troshin, PhD,Tech lead, Trading Platform
  2. 2. Contents21. Broker for algorithmic tradersInternal architecture overview2. Current risk scheme and its drawbacksProblems by design. Implementation problems.3. Risk calculation and control proposalCross-asset portfolio margin risk management innear real time mode.
  3. 3. EXANTE platform3• One client account for all products• Trading terminal for Win, Mac, Unix• FIX connection
  4. 4. 4Presence in all major financial centres• 50+ Exchanges• 100K+ Instruments
  5. 5. 5• 10+ data vendor gateways• 10+ execution gateways
  6. 6. 6Parallel trading via many Gatewaysusing one Account=> Accurate risk control is needed
  7. 7. Current Risks7
  8. 8. Initial startupAfter each tradeCurrent Risks8
  9. 9. Current Risks9Pros:• Simple and extremely fast GatewayCons:• Limits update are not fast enough because ofheavy calculations on Back Office side• Orders data are encapsulated in Gateway• Portfolio Margin is not calculated• High BO=>RA traffic (symbols * accounts)• Gateway restart takes significant time• Possible inaccurate limits
  10. 10. Risks Requirements10• 100K symbols and 10K accounts• Fast risk calculation, updates and checks• Use orders data in risk processing• Portfolio margin calculation• Reasonable traffic (symbols + accounts)
  11. 11. Risks Proposal11SymbolLimit = FreeMoney * LeverageRate *CrossCourse / PriceDefinitions• MarginCoefficient = CrossCourse / Price(initial margin to open position with quantityset to 1 and leverage rate set as 1)Facts• Margin Coefficient doesn’t depend onaccount• LeverageRate is the same for many accounts• CrossCourse and Price can not change
  12. 12. Initial startupTrade processingRisks Proposal12
  13. 13. Free Money13Account Margin =SUM(Asset Margin) +SUM(Cross-Asset Margin)Asset Margin =Quantity *LeverageRate *MarginCoefficientCross-Asset Margin = SPAN-like algorithmfor same underlying
  14. 14. Improvements141. Move free money calculation to Risk Agent.Orders synchronization is needed.2. Compute free money using cross margininginfo3. Use margin data in ATP
  15. 15. Proposed risks15Pros:• Gateway is still very fast(<1ms)• Orders are used in limits calculation• Portfolio Margin can be calculated in differentways• Cross margin data could be used• All limits and leverage rates could beoverridden• Fast as light risk updates• Backup gatewaysCons:
  16. 16. 16Questions?Sergey Troshin, PhD, Tech Lead (st@exante.eu)www.exante.eu

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