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Audit of investment strategies

In order to help customers to reach the optimum risk/profitability and choose an appropriate capital management strategy, Faunus Analytics offers a unique service – «Audit of investment strategies and trading systems». This service can help to increase significantly the reliability and operating efficiency of a wide range of financial market participants:

  • If you are a private trader, a fund or an investment company, most probably you wonder – how much are the used trading strategies efficient? How will they behave in future? Is a simple calculation of the profit amount enough? Is it right to rely upon only average statistical data (point estimates)?
  • If you develop automatic trading systems and are concerned about the quality of your product, it will certainly be useful to you to know how to optimize your models and take into account the multitest problem. How to preserve the acceptable level of the trading quality in the longer term?
  • Or let’s assume that you are an investor and want to transfer your money in trust. Can you put trust in declared profits, rising graphs and nice presentations? How can you orientate yourself in the variety of offers? How to justify the investment object you chose? How to keep and multiply money under the conditions of the international economics instability?

A probability of trading system future profitability (under the conditions of variability in markets, data limitation, random factor occurrence) is analyzed within the framework of the service and a statistical analysis of the properties of trading strategies that are critical for an investor is carried out. The research is carried out applying advanced software and a complex range of advanced analytics methods and tools. Here are some of them:

  • Statistical and simulation modeling
  • Scenario and predictive modeling
  • Nonparametric estimation
  • Confidence interval assessment and analysis
  • Stress testing
  • Stability analysis

At the present moment the service is available only for FOREX and precious metals market. The result of the research is a report and instruction for its use. The standard delivery* report includes the following:

  1. Diagram of future distribution of the order average profit in pips
  2. Diagram of future distribution of the maximum drawdown probability considering a 12-months’ period in pips
  3. Diagram of future distribution of the profitability ratio**
  4. Table of future distribution of the order average profit in pips
  5. Table of future distribution of the maximum drawdown probability considering a 12-months’ period in pips
  6. Table of future distribution of the profitability ratio
  7. Table of confidence intervals of the average order profit in pips
  8. Table of confidence intervals of the maximum drawdown considering a 12-months’ period in pips
  9. Table of the profitability ratio confidence intervals

One should have basic knowledge in the area of the theory of probability and applied statistics to use the results of the audit and accurate interpretation of its results. Basic data*** for the analysis is the history of trading orders created in the result of work under the investment strategy undergoing audit.

Contact us to find out details of the offer, its cost and terms and to get an example of a report and a description of the input data format.

* The basic composition of the service is given. Additional researches may be carried out depending on individual wishes of the customer.

** The profitability ratio is calculated by the following formula: (the total amount of payoffs on winning orders)/(the total amount of losses on losing orders).

*** Additional transformations and cleaning may be required if a customer presents data in a format that differs from the standard one.

See also