By Kaleb Nunn
At Ledger Works, we’re revolutionizing cryptocurrency portfolio risk management with our groundbreaking inference model. Our innovative approach allows us to estimate asset return distributions up to four months in advance with 90% accuracy. This level of precision far surpasses that of ordinary risk management models used by asset managers today.
To demonstrate the effectiveness of our methodology, we conducted walk-forward backtests using distinct simulation strategies. One is based on a normal distribution, while the other utilizes our sophisticated inference approach. Both leverage advanced statistical techniques for parameter estimation, ensuring the highest level of precision.
We evaluated the accuracy of these models by comparing their forward-looking predictions and goodness of fit against historical data, focusing on:
- Forecasted Confidence Intervals: The range within which the estimated price is expected to fall a certain percentage of the time,
- Kolmogorov-Smirnov Test: Measures how closely the predicted distribution aligns with the observed data,
- Kullback-Leibler Divergence: Quantifies the difference between the predicted and actual distributions, and
- Skewness: Assesses the asymmetry of the predicted distribution.
Our findings reveal that the Ledger Works’ approach provided a more accurate fit for forward asset returns than the normal distribution, outperforming it across all key metrics. This outcome not only highlights the superior performance of the Ledger Works approach but also sets a new benchmark for backtesting similar machine learning and generative models in the future.
The full paper offers an in-depth exploration of our methodology and results, providing valuable insights for professionals in the DeFi space. If you’re interested in delving into the complete research and understanding how our approach can enhance your risk management strategies, contact us at Ledger Works. We’re eager to share how our findings can help you make more informed decisions and optimize your cryptocurrency investments.
Feel free to reach out to Ledger Works to access the full paper and discover how our cutting-edge methods can benefit your financial strategies. Contact Us.
