News & Articles

Holistic Investment Management

posted Jan 16, 2019, 2:57 AM by Felix Fernandez   [ updated Jan 16, 2019, 2:57 AM ]

A Systematic Approach for Managing Complex Portfolios

Managing complex portfolios can be a daunting task and is typically very time consuming. In this paper we propose to take a more holistic view on the investment universe in scope. 
In order to understand the dynamics of the individual investment universe, it is important to have a model, which can help to measure the relevant properties of this universe.
We introduce the concept of “Geometric Shape Factors” (GSF), which allows to dynamically manage the investment portfolio by providing clear and intuitive guidance on when it is reasonable taking additional market risks and when not.
With a “real world” production example, we show for a portfolio of bonds and precious metals that the GSF concept provides better risk adjusted performance than typical approaches (e.g. minimum variance optimization).

  • Dynamic portfolio management based on geometric shape factors can help to optimize investment portfolios from a holistic perspective.
  • The application is straightforward and can be integrated in the regular investment management process.
  • Portfolio rebalancing weights can be obtained by the OpenMetrics® Risk.Monitor report. It incorporates a rich set of risk analytics for professional risk/investment managers and is available on a monthly, weekly or bi-weekly subscription. 
  • Try it 3 months for free, just send an email to

Stabilize your Investments - Dynamic Overlay Technology from OpenMetrics

posted Jan 12, 2019, 3:40 AM by Felix Fernandez

Dynamic Overlay Technology from OpenMetrics

Basically, all investment managers seek to actively protect their investments against unwanted drawdowns.

As static* diversification between asset classes does not protect well during severe market crises due to increasing correlation, therefore it is important to manage drawdowns already on asset class levels.

Typical approaches (e.g. volatility based) are too slow to provide meaningful protection. In addition, buying insurance during phases of high volatility is typically expensive.

In this paper we propose an innovative approach to control drawdowns in a dynamic fashion via a dynamic overlay technology.

The proposed approach is based upon advanced statistical concepts - Bayesian Change Point (BCP) analysis - and allows for a timely and efficient risk management. The theoretical foundation for this approach is public and can found at the ETH Zurich library**.


- Dynamic overlay strategies based on advanced statistical concepts can help to protect investment portfolios on asset class level.

- The application is straightforward and can be integrated in the regular investment management process.

- Stability signals can be obtained by the OpenMetrics® Risk.Monitor report. It incorporates a rich set of risk analytics for professional risk/investment managers and is available on a monthly, weekly or bi-weekly subscription.

- Try it 3 months for free, just send an email to

* Static diversification stands for maintaining a predefined ratio between different asset classes.


Currency Hedging – Proof of Concept - Sample Use Case for a FX Portfolio

posted Jan 3, 2019, 9:55 AM by Felix Fernandez

"We have no control over outcomes, but we can control the process. Of course, outcomes matter, but by focusing our attention on process, we maximize our chances of good outcomes. “

Michael J. Mauboussin

-      With a global scope of investment activities, the involved currency risks for larger portfolios can be substantial and have to be managed properly.

-      Typical approaches are either not to hedge at all or to hedge the existing currency exposure to certain extent statically (e.g. 50% or even 100%), which may lead to significant costs for long term commitments.

-      In addition to the costs of long-term static hedging, which of course protects against losses triggered by the external currency, it also hinders to participate in favorable currency moves.

-      The aim of this proof of concept is to assess the potential of a dynamic hedging approach by applying advanced statistical methods to the exchange rates of several currency pairs.

-      Based on the measured currency stability, the hedge ratios are adjusted on a rolling, monthly basis.

-      All simulations are calculated out-of-sample to ensure the highest accuracy in the expected results.

“Don’t Panic” – Part II: Practical aspects - on how to navigate through choppy financial markets

posted Nov 28, 2018, 4:03 AM by Felix Fernandez   [ updated Nov 28, 2018, 4:08 AM ]

 In our last short paper on “How to navigate choppy financial markets”, we suggested to follow four principles:
  • First, to define the portfolio composition and exposure levels per asset class.
  • Second, to implement a well-prepared process for managing exposure in a crisis (being large or small) - either by hedging or by just buying or selling the assets.
  • Third, instead of moving in and out of choppy markets, to define target exposure by an appropriate risk measurement methodology, which has been thoroughly tested.
  • And fourth, to continuously manage exposure along the implemented process.

From the feedback we received so far, one of the most prominent questions was:

• “Which risk measurements do you use to control the hedging process?”

In this short paper we compare some common market risk measurements with stability analysis and discuss the results.

“Don’t Panic” - Or, how to navigate through choppy financial markets.

posted Nov 19, 2018, 6:35 AM by Felix Fernandez

Currently, the media is full of different views about an upcoming market crash. Every day you may read about recent trends, new interpretations and predictions in which direction the markets should go – or not go.

Probably, we should remind ourselves that:
  • Panic driven actions are never a good strategy
  • Until today still nobody can predict the market
  • Severe market crises do not necessarily announce itself
  • Market crises do not follow any specific time pattern
In this short paper we propose to stay calmed during choppy markets, focus on measurable facts and follow well tested processes.

Reliably Recognize Evidence of Financial Crises

posted Nov 9, 2018, 1:38 AM by Felix Fernandez   [ updated Nov 9, 2018, 1:42 AM ]

Zurich 09.11.2018 - Article in Private Banking Magazin

To prepare against market crises, many investors combine different indicators with their own assessments - often without success. 
The Bayesian stability analysis, on the other hand, provides reliable information about upcoming market crises and helps to prepare against unwanted losses.

The German Private Banking Magazine published an extensive article about our approach. Yo can find the original article (in German ) under 

OpenMetrics Robo - X

posted Nov 1, 2018, 9:09 AM by Felix Fernandez   [ updated Nov 1, 2018, 9:17 AM ]

An Antithesis to Common AI-Based Investment Management Approaches…

We can currently observe, that the topic “AI in Finance” has got massive attention in the industry and that many large players invested significant resources in related projects or are planning to do so. We can also observe that in some cases the performance results being claimed are so fantastic that – if true – no investor should look anywhere else to allocate its funds…unfortunately, in most of the cases these hypothetical results do not withstand the test of reality…

In this presentation, we challenge the current industry approaches of trying to find patterns in financial markets. Instead, we advocate to use probabilistic methods, which are per design capable of dealing with the noisy nature of these markets. In addition, we show a functioning AI-based pilot fund, which is in production since July 2017.

Bitcoin…a Reasonable Asset Class?

posted Oct 24, 2018, 8:11 AM by Felix Fernandez

Why not…?
In this short paper, we analyze the properties of Bitcoin in comparison to other asset classes from an investor perspective.

We can conclude, that a Bitcoin investment (if properly managed) creates added value to an investor portfolio.

Due to the availability of Bitcoin proxies, investing in Bitcoin with a dynamic hedging overlay results in a reasonable asset class, which should be considered for portfolio diversification.

OpenMetrics® RiskMonitor Product Information

posted Sep 26, 2018, 3:11 AM by Felix Fernandez   [ updated Sep 26, 2018, 3:28 AM ]

OpenMetrics® RiskMonitor is a comprehensive, risk report tailored for the specific needs of investment/risk managers.
Advanced risk reporting with exclusive risk measures in combination with dynamic hedging and portfolio management available on demand via an attractive subscription model. 

Every report is customized precisely to your requirements. You can rely on the most advanced quantitative algorithms without spending any time in implementation efforts, just use the electronic delivery formats for your preferred integration into your business. 
Delivery frequency is monthly, weekly or intraweek. 

Custom risk reports are available for: 
  • Equity indices
  • Bonds
  • Commodities
  • Currencies
  • Funds
  • …or any suitable timeseries

Advanced Risk Management Technology - Financial Industry

posted Sep 25, 2018, 1:29 AM by Felix Fernandez   [ updated Sep 25, 2018, 2:25 AM ]

Risk management starts with risk measurement!
We are highly convinced that the core of proper risk management in financial markets is to measure risks accurately. Unfortunately, many players in the industry still rely on measures, which are simply put: Not fast and not precise enough for this purpose.

With this overview about our core technologies, we open the field for a new generation of risk measurement as well as different use cases for it.

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