Hybrid Hedger Tuning - Triggers
Triggers define the conditions for which flow has to match to activate a given hedging rule, these can be defined for:
- Client Trade
- Risk
- VaR
- News
Triggers can be time limited, delayed or simply active until a suitable hedge has taken place. This means we can define the window for which the rule becomes active before standing down.
Client trade
The client trade trigger is activated by trades originating from counterparties defined in groups (under hedging.rules.trigger.clientTradeCriteria), these may be statically defined groups or dynamic groups that update the defined counterparty list based on a dynamic classification tagging strategy. This is then tied into the risk management decision.
Please not that the hedgers do not hedge a client trade 1-1, rather a matching counterparty will trigger the hedger to become active, which then looks to reduce the overall book VaR based on the most effective hedge. See What is the Difference Between Brokering and Hedging in Compass? for more information.
The below rule would become active whenever a counterparty listed under the INTERNAL-TAKEPROFIT group makes a trade, as long as the overall book VaR is >1% of maxVar
Dynamic rules are configured in the same way, the dynamic classification is defined in the hedging.rules.trigger.clientTradeCriteria config key as below:
Risk / Var
Risk and VaR triggers activate a hedging rule as a percentage of the systems max VaR relative risk. The max VaR level is configured at the key: risk.varEquivalentRisk.maxVarLevel
If maxVarLevel is configured at 10k for example, the below rule is activated when system VAR breaches 0k.
News
The news trigger activates around news events of a defined weighting. The hedging rule will activate for the period defined by the milliseconds before and after an economic news event of matching weighting or above:
TIMe limits and delays
A delay on a hedging rule enforces a minimum period for the hedger to remain inactive after a matching trade has triggered the rule.
The time limit specifies the period for which the rule is active before it stands down, it will be reactivated when another matching trade occurs.
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