Darwinex expands reference period for VaR calculation via Risk Manager tool

Darwinex expands reference period for VaR calculation via Risk Manager tool


Darwinex, the FCA-regulated social forex broker and trading platform, said it has enhanced the Risk Manager, one of its fundamental pillars, with the expansion of a reference period to calculate the value at risk (VaR) in the underlying strategy. The new period has been doubled to 45 days from the previous 21 days.

The answer is that the greater the reference period, the greater the VaR would be and the less the sensitivity of the VaR curve would be to the behavioral changes of the underlying strategy, Darwinex explained. It also noted that 45 days is the optimum reference period to calculate the VaR without producing a significant loss.

Recently, the platform operator announced the implementation of a new formula for the calculation of the VaR of a DARWIN (a trading strategy which can be followed by investors), lowering it to 10% a month. It also introduced a new criteria of the closing of a position by the Risk Manager.

The Risk Manager is a tool that controls the investor risk in an independent manner from the trader and maintaining the same risk for all the Darwins. It makes two adjustments in the leverage of the investors vs. the traders. The tool applies adjustment in function of the VaR of the underlying strategy depending on how the risk in the account behaves in a proportional manner to the leverage of the underlying trades.

Darwinex was set up in 2012 as TradeSlide and was operating as a regulated investment adviser. In the spring of 2014, however, it overhauled its platform, obtained a broker license from UK’s regulator FCA and got rebranded Darwinex.

The social platform of the broker allows users to upload data on their performance and strategies, which are evaluated through a set of criteria and, if deemed eligible, turned into Darwins.

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