Rmfe performance simulation - 2008-01-01 to 2012-10-04

Rotating Model Forecasting Engine - Simulation Results from 2008-01-01 to 2012-10-04

Rotating Model Forecasting Engine

Fact SheetSimulation Results from 2008-01-01 to 2012-10-04

Simulated Trading Performance

Cumulative Trade Return I

Portfolio EUR.AUD EUR.GBP EUR.JPY EUR.USD USD.XAG USD.XAU

2008 1.09 1.03 1.11 0.97 1.00 1.16 1.06

2009 1.05 0.99 1.04 1.02 1.14 0.85 1.19

2010 1.12 1.13 1.11 1.12 1.08 1.17 1.05

2011 1.05 1.01 0.94 1.05 1.09 0.88 1.14

2012 1.04 0.99 0.96 1.00 1.04 1.09 1.14

Total 1.39 1.16 1.13 1.17 1.40 1.10 1.711.0640 1.0556 1.0712 1.1517 1.1768 1.2845

Cumulative Trade Returns, after trading cost for analysed Instruments using MM2 Rotating Model-based Trading Positions. Series correspond

to summary statistics shown on first page.

The hypothetical, equally-weighted Portfolio (grey line) of all six instruments shown here has a cumulative Trade Return of 1.39, an Excess

Sharpe Ratio of 0.88, and an average Leverage of 1.0 (max. leverage 2.0) over the period 2008 - 2012.

I Measured for each year / for all years. Stopped, after trading cost at average Leverage of 1.0.

0.9000

1.0000

1.1000

1.2000

1.3000

1.4000

1.5000

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Portfolio

(C) 2013: Wolfgang Schwerdt; [email protected]; +41 79 847 22 36 of 5


Sharpe Ratio II


2008 0.68 0.32 1.21 -0.60 -0.04 0.60 0.33

2009 0.67 0.02 0.50 0.48 1.62 -0.35 1.02

2010 1.87 1.63 1.69 1.39 1.43 0.73 0.40

2011 0.61 0.35 -1.30 0.80 1.20 0.09 0.75

2012 0.89 -0.91 -0.80 0.22 0.82 0.55 1.23

Total 0.88 0.53 0.50 0.54 1.00 0.31 0.65

II Annualised Excess Return Sharpe Ratio over Euro Overnight Index Rate (EONIA), representing an alternative investment in liquid cash.

Average Daily Exposure III


2008 0.94 0.92 0.94 0.97 0.94 0.94 0.94

2009 0.95 1.03 0.97 0.89 0.95 0.94 0.92

2010 0.92 0.86 1.06 0.85 0.90 0.94 0.92

2011 1.02 1.04 0.99 1.03 1.05 1.02 0.98

2012 0.95 0.84 0.90 0.88 0.96 1.05 1.07

Total 0.96 0.94 0.97 0.93 0.96 0.97 0.96

0.3763 0.3899 0.3706 0.3836 0.3889 0.3838III

Average daily position size in percent of allocated capital. Exposure of 1.0 represent 100% invested, no leverage (Leverage Factor of 1.0).

Methodology

Trading Logic

1 -> 100% Long Position

-1 -> 100 % Short position

Positions / Exposure are in percentage of capital allocated to the instrument.

To obtain an average leverage of 1.0, the original trading positions are scaled up by factor 2.5.

Portfolio positioning can be used to obtain a consistent leverage of 1 (or multiple thereof) as exposure.

Trading Cost No fixed Trading Commission cost. Trading Positions are assumed to be sufficiently large.

Bid-Aks Spread of 1.5 BPS, factor 0.00015, applied to changes in Trading Positions.

Stop Determination For each trading week, stops (in %) are determined ex ante using the best performing stop level

for the 5 previous business days. A stop level of 0 implies that the optimal stop level consists in

not trading at all for a particular day.

Stopping logic is not applied to USD.XAG and USD.XAU due to the very high intra-day volatility.

Excess Return R(t,t+1) - EONIA(t) * abs(a(t)) / (100 * 360)

R(t,t+1): Trade Return of the instrument from date t to date t+1.

EONIA(t): Euro Overnight Index Rate for date t in percent (quoted on 360 day basis).

a(t): Trading Position of the Instrument for date t.

Excess Sharpe Ratio Assuming identical Trading Cost for Instrument and Benchmark Rate (EONIA).

Benchmark Trading Strategy Moving Average Cross Over Strategy, using 7 and 24 day moving averages.

Long (+1), if 7 day moving average >= 24 day moving average, else short (-1).

Trading Positions are limited to +0.4, -0.4 to ensure comparability in leverage with MM 2 Trading.

Daily Positioning.

Case of positive Sharpe Ratios corresponding to negative Cumulative Returns: Difference due to trading cost which is not taking into account when

calculating Sharpe Ratios.

Up to one Trading Position per day and Instrument. Original instrument Trading Positions are a function of

the signal produced by the Engine, are time varying in size, but contained between -1 and 1, averaging at

0.4 in absolute terms.

Annualised average Daily Excess Return over average Daily Standard Deviation of Excess Return times the

square root of the number of days in a year.



EUR.USD

Stopped Trading Performances after cost

EUR.JPY


MM2 Engine (blue) versus Moving Average Cross Over Trading [7, 24] (red). Trading Performances are based on an average leverage of ca. 1.0.


0.8000

0.9000

1.0000

1.1000

1.2000

1.3000

1.4000

1.5000

Cum Instrument Return t+1 Cum Trade Return: M0724, Stop, Cost, Lev 1.0 Cum Trade Return: MM2, Stop, Cost, Lev 1.0

0.4000

0.5000

0.6000

0.7000

0.8000

0.9000

1.0000

1.1000

1.2000

1.3000




EUR.AUD


EUR.GBP




0.6000

0.7000

0.8000

0.9000

1.0000

1.1000

1.2000

1.3000

1.4000


0.9000

0.9500

1.0000

1.0500

1.1000

1.1500

1.2000

1.2500

1.3000

1.3500

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USD.XAU

Non-Stopped Trading Performances after cost

USD.XAG

Non-Stopped Trading Performances after cost


Due to very high intra-day volatility, ex ante stopping not succesfully possible with USD.XAU.

Due to very high intra-day volatility, ex ante stopping not succesfully possible with USD.XAU.


0.5000

0.7000

0.9000

1.1000

1.3000

1.5000

1.7000

1.9000

2.1000

2.3000

2.5000

Cum Instrument Return t+1 Cum Trade Return: M0724, No-Stop, Cost, Lev 1.0 Cum Trade Return: MM2, No-Stop, Cost, Lev 1.0

0.5000

1.0000

1.5000

2.0000

2.5000

3.0000

3.5000

Cum Instrument Return t+1 Cum Trade Return: M0724, No-Stop, Cost, Lev 1.0 Cum Trade Return: MM2, No-Stop, Cost, Lev 1.0


Rmfe performance simulation - 2008-01-01 to 2012-10-04

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