Due to the layer of risk management between the trader’s strategy and the associated DARWIN, the result of each one can be different.
All DARWINs have a monthly objective VaR of 10%, independent of the VaR the underlying strategy might have. The Risk Manager is in responsible for managing the DARWIN’s leverage in order to obtain the objective VaR.
The algorithm does not eliminate risk, but rather it manages risk independently from the traders underlying strategy. The Risk Manager acts in two ways in order to maintain the VaR stable at 10%.
1. Every time a trader sends an order to the market, taking into account the current market conditions at that precise moment, the algorithm calculates the necessary size for the investors’ orders.
2. In addition, whilst the traders position remains open in the market, the algorithm can carry out risk adjustments, ensuring that the position does not exceed the maximum D-Leverage in regards to the duration of the position - the longer duration of the trade, the less the risk tolerance is, and vice versa. This means that, throughout different timeframes, the Risk Manager monitors the open trades live, proceeding to then partially or fully close them in regards to the trade’s risk level under the current markets underlying conditions.
You can learn more about Risk Adjustment by reading this article.