Cash Allocation Optimization and Cross-Asset Coordination

Optimal money management is as fundamental for α-generators as a valid trading strategy.

Yet, traders too often allocate funds to deals according to gut feel, rather than following a mathematically
optimal approach. VERMONT HARDING’s Cash Allocation Optimizer agent CALOC calculates the trade-off
between allowed risk exposure and required capital efficiency during runtime. In contrast to myopic offline solutions, CALOC is a real-time closed-loop system with an awareness of risk and realized profit/loss which –
in closed-loop – is being considered for later money allocation decisions for profit accumulation.

Extending VERMONT HARDING’s Cash Allocation Optimizer, our Cross Asset Coordination emergent system CAC helps fund managers to coordinate a higher level long-term strategy, such as hedging. Classically such agents manage low correlated or negatively correlated assets.

Trainable to Your Personal Risk/Profit Profile – In contrast to state-of-the-art black-box system, you do
not need to take what you hopefully get out of a secretive formula. CALOC is based on Operations Research technologies and allow us to train trade agents according to you personal risk/profit profile. Typical goals pursued by our money management agent are:

• Maximizing average returns per deal.
• Maximizing the number of winning deals over a longer time period.
• Maximizing the probability to achieve a specific profit target.

Autonomous Closed-Loop Control – Considers prior profits and losses to fund current deals from previous returns, while maintaining safety thresholds in case of losses.

Online Adaptability – CALOC changes its money management strategy online based on the current state of its account and current state of the market.

Cross-Asset Coordination – Extended money management CAC coordinates a team of trade agents to pursue a top-level trading strategy, such as hedging or the deliberate preference of assets that perform better over others.

The Benefits of Money Management

Benefits include:

• Improved capital efficiency.
• Enhanced returns.
• Better visibility of return probability over multiple investment periods.
• Better understanding of risk and why a return goal may remain unfulfilled.
• Better business planning through improved predictability of returns.
• Increased manager flexibility.

Money management as stand-alone module

CALOC and CAC would usually integrate with Vermont Harding's trade agents. For those enterprises that are concerned about integrate it with their proprietary trading platforms or want to use it as improvement to their
own strategies, we deliver CALOC and CAC as stand-alone modules.