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FinTech R&D Corp.

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Riskoptima Robotrader

The hands-free RiskOptima Robotrader brings a new approach to portfolio management.


It opens and manages portfolios of stocks, futures, forex and even cryptocurrency instruments combining Artificial Intelligence with the concept of "Statistical Arbitrage". 


Our "market-neutral" portfolio creation algorithm not only has Deep Learning enclosed, but also introduces Cause-and-Effect relationships into A.I.


No wonder why Clive Granger won the Nobel Prize in Economics in 2003 with his “Statistical Arbitrage” framework as well as the Granger-causality concept.

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RiskOptima Forex Robotrader
5 Year Long Backtesting Results

RiskOptima Forex Robotrader combines AI with the statistical arbitrage algorithm. In 2003, the concept of "statistical arbitrage" brought its inventor the Nobel Prize in Economics. It creates portfolios guaranteed to bring profits with a 95% success rate, independent of market conditions in ideal situations. However, it is not easy to catch an ideal situation.  By the way, what we call an ideal situation is the optimized version of all the parameters in the algorithm. For example, the first parameters that come to mind are the portfolio levels that trigger “take-profit” or “stop-loss”. If even these are not ideal (not optimized), the success level of this algorithm, which should actually be 95%, goes down. Some problems previously experienced due to similar causes in statistical arbitrage have now been minimized thanks to our founder Ilkay Boduroglu, who added artificial intelligence to the model and made theoretical contributions to the algorithm. Right now, Forex Robotrader software, developed by RiskOptima, can choose portfolios with an 80% success rate, if not 95% as mentioned above. We know that the ‘successful traders’ in Wall Street have a 56% success rate when they choose individual instruments. So, we managed to raise the bar up to 80%. We still aim for 95% though.

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NB: In the graph below, the horizontal axis indicates the opening/closing sequences of each portfolio.  

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  1. Robotrader was backtested using the forex data of the last 5 years.

  2. In the statistical arbitrage portfolios created by Robotrader, only AUDUSD, EURUSD, GBPUSD, NZDUSD, XAGUSD and XAUUSD were used.

  3. Other parities can be also used in the portfolios. (including options and other instruments)

  4. All the experiments are out-of-sample. 3 monthly end of day data was used as training data.  

  5. All the accounts in the report were USD based where the ratio of leverage was fixed as 10.

  6. The experiment started with virtual $100,000; in each successive experiment, again virtual $100,000 was used.

  7. In the accounts, prices and spreads quoted in FXCM.com were taken.  FXCM.com does not charge a fee for forex transactions. Therefore, we fixed the commission fee as zero.


Results:

Test start date:  Dec 02, 2015   (Date the first portfolio opened)

Test end date: Nov 20, 2020   (Date the last portfolio closed)

Test total duration: About 60 months


Number of portfolios opened and closed: 31

Number of analyzed portfolios: 30 (Last portfolio is not included in the account because it was closed early as the test duration ended.)

The duration of training data before each experiment: 3 months

Duration of each portfolio, on average: 1.5 months (47 calendar days)

Duration of stay in cash between two portfolios (on average): 12 calendar days

Average portfolio duration including stay in cash: 2 months (59 calendar days)

Number of portfolios per annum (on average): 6

Ratio of leverage: 10

Average return from each portfolio: 6.07 % (USD)

Maximum Drawdown: 12.8%

You can download the Turkish version of our backtesting report from the link below:

Türkçe Backtesting Raporu

 

Company Profile

RiskOptima FinTech R&D Corp., the startup to be established within 2021 in Istanbul is getting under way by adopting the Financial Engineering methods developed by Ilkay Boduroglu, PhD for the last twenty years. The advisory board, selected among the founding partners, consists of highly reputable names in their fields. The algorithm, utilized by Riskoptima Forex Trader software, brought its inventor the honor of Nobel Memorial Prize in Economic Sciences in 2003.

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Who is Ilkay Boduroglu?

Our founder Ilkay Boduroglu received his Ph.D. in 1997 from Columbia University’s Industrial Engineering – Operation Research Dept.
His Ph.D. advisor is Prof. Don Goldfarb. Boduroglu’s doctoral research was related to designing optimization algorithms for massively supercomputers of the time, which had as many as 512 processors. One of the applications that Boduroglu produced from this research was an Artificial Intelligence model that predicted the customers who would cancel their American Express Cards in the near term.
Another application was for a large-scale transportation problem similar to that an airline company would need to solve in order to assign planes, pilots, and crew to all the flights as well as determining the routes and schedules for all those routes planes would fly in the next 12 months.

Boduroglu worked in a successful Silicon Valley startup, Demandtec, in the year 2000. Demandtec would optimize prices for thousands of items sold in all branches of a retail chain.

A year after he returned to Bogazici University’s Industrial Engineering Dept in 2001, Boduroglu became one of the founders of Bogazici University’s Financial Engineering M.Sc. Program. He designed and gave the course with the title “Artificial Intelligence in Finance” in 2002, which was quite an early time for such a course.

After having taught in the Informatics Institute of Istanbul Technical University, which housed the first National Supercomputing Center in Turkey, Boduroglu’s research interest became mainly focused on Financial Engineering. Boduroglu published 4 academic papers in this area. He then got out of academia to startup Riskoptima FinTech Research Corp. with several of his classmates from Bogazici University’s Mechanical Engineering Class of ’85.

His main contribution to the software products that Riskoptima produced was to center financial engineering algorithms around Granger-causality and Artificial Intelligence. As seen in the article “What AI still cannot do?” (posted at our blog site), the AI community has been shying away from introducing causality into AI until very recently. For example, if asked “do storks bring newly born children to earth”, an Association Rule hunting AI code would probably scream “yes” because there is a spurious or deceitful correlation between the increase in human population in a certain area of the world and the increase in stork population. No wonder why Clive Granger won the Nobel Prize for Economics in 2003 with his contributions to econometrics, the most important of which was Granger-causality.

Ilkay Boduroglu says his model hedge fund is the world-famous Renaissance Fund founded by a professor of Mathematics, Jim Simons in 1982. Simons introduced Artificial Intelligence into Financial Engineering in the 1980s by inviting two Computer Science Ph.D.s from IBM who were experts in AI. Hence came the success of the Medallion Fund, which is second to none.

 

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Thanks for your interest in RiskOptima FinTech R&D Corp. For more information, feel free to get in touch and we will get back with you soon!

Phone Number: +90 (five-three-two) 064-0055