1. Company:
A 150 year old financial powerhouse, entrusted us with navigating the complexities of their illiquid portfolio. As France’s third-largest bank, their global footprint spans retail, private, investment, and corporate banking.
2. Challenge:
The bank faced the challenge of partially hedging a portfolio of illiquid class-A shares on the Shanghai and Shenzhen stock exchanges. The objective was to use CSI 500 and CSI 300 futures for hedging while adhering to regulatory and risk management constraints on equity exposure. The baseline model, a rule-based approach utilizing CSI 500 futures, needed improvement in minimizing drawdown, reducing portfolio variance, and enhancing returns.
3. Our Solution:
We crafted a bespoke solution—an innovative hedging algorithm that tactically employed CSI 500 and CSI 300 futures. This introduced a nuanced approach to navigate regulatory and risk management constraints, aiming to surpass the baseline model's performance by optimizing drawdown, portfolio variance, and returns simultaneously.
This approach not only met but exceeded expectations, setting the stage for a performance that outshone the baseline model.
4. Results:
Quantified Improvements: Achieved an outstanding improvement of 15.05% over the baseline model.
Monetary Gain: This improvement translated to a substantial gain of approximately €42 million over the baseline model.
Risk Reduction: Successfully decreased risk (drawdown) by more than 15%.
Image: [Include a snapshot/graph of the algorithm's performance in hedging]
Conclusion:
The collaboration between our client and Quantolio resulted in a paradigm shift in portfolio management, showcasing the effectiveness of our tailored algorithm. The quantified improvements underscore our commitment to delivering exceptional results and maximizing returns while minimizing risk.
This case study is a testament to Quantolio's ability to address complex challenges, providing solutions that not only meet but exceed expectations. If you're seeking transformative results for your financial portfolio, we invite you to explore how our innovative algorithms can propel your success.
