Client benefits and application areas
QanSystem provides a wide range of statistics for assessing the prevailing market situation, such as:
- Directional indicators based on the probability of a rising or falling market
- Movement indicators showing both the probability and possible extent of large market movements
- “Sharpe ratio” like risk / return measures built around expected profit, expected loss, expected volatility, expected profit conditional on the forecasted market direction being right or wrong, etc.
- Variety of distribution ratios, such as anticipated profit / loss or expected volatility
- Confidence measures to assess the reliability of a forecast
All this is possible because a distribution function conveys a complete picture of stochastic variability (leaving little scope for unwelcome surprises).
Using advanced risk / reward maps, not only is expected market behaviour recognised, unusual patterns can also be identified. For example, a highly asymmetric distribution with a large negative skew would demonstrate limited upside potential with considerable downside risk. This, for example, would suggest selling a call option or going short with a futures contract, depending on one’s risk appetite. In a similar way, the statistics and indicators derived from the distributional forecast can be translated into specific trade recommendations.
Given that entire distribution functions are being forecasted, QanSystem can also be used as an alternative to option pricing. This opens up possibilities of arbitrage, as the “fair value” of an option determined on the basis of QanSystem may be higher or lower than the market price. Furthermore, the alternative option prices may be employed for hedging purposes, to enhance profit capture or to mitigate and manage risk.
Who is Qantares for?