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How does Zorro calculate capital requirements? #476792
04/03/19 17:33
04/03/19 17:33
Joined: Feb 2017
Posts: 754
Chicago
AndrewAMD Offline OP
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AndrewAMD  Offline OP
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Joined: Feb 2017
Posts: 754
Chicago
jcl,

I am curious to know exactly how Zorro is calculating its recommendations for capital requirements.

Take, for example, the attached image of a stock portfolio system I am working on.

* Initial capital is set to $100k.
* At the end of an OOS test, log says capital of $84k.
* Meanwhile, the monte carlo capital recommendations are at ~$220k.

Is there a reason for the large discrepancy between the last two?

Thanks,
Andrew


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Re: How does Zorro calculate capital requirements? [Re: AndrewAMD] #476797
04/04/19 07:26
04/04/19 07:26
Joined: Jul 2000
Posts: 27,010
Frankfurt
jcl Offline

Chief Engineer
jcl  Offline

Chief Engineer

Joined: Jul 2000
Posts: 27,010
Frankfurt
Required capital = max margin + max drawdown.

Re: How does Zorro calculate capital requirements? [Re: jcl] #476799
04/04/19 10:21
04/04/19 10:21
Joined: Feb 2017
Posts: 754
Chicago
AndrewAMD Offline OP
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AndrewAMD  Offline OP
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Do you mean:
* Max margin used at any point in the Test?
* Max drawdown at any point in the Test?

Also, are the formulas different between Monte Carlo (left) and in the log (right)?

Re: How does Zorro calculate capital requirements? [Re: AndrewAMD] #476800
04/04/19 10:35
04/04/19 10:35
Joined: Jul 2000
Posts: 27,010
Frankfurt
jcl Offline

Chief Engineer
jcl  Offline

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Joined: Jul 2000
Posts: 27,010
Frankfurt
Yes, maximum means the maximum of the test. The drawdown is normalized to 3 years. But when you reinvest profits, most performance parameters become meaningless. Monte Carlo, drawdown, and required capital make only sense when you do not set the Capital variable. Otherwise they will depend on your investment.

The details of parameter calculation can be found under "performance report" in the manual.

Re: How does Zorro calculate capital requirements? [Re: jcl] #476801
04/04/19 10:52
04/04/19 10:52
Joined: Feb 2017
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Chicago
AndrewAMD Offline OP
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AndrewAMD  Offline OP
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Thank you for the clarifications.

Andrew


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