Who We Are
We are a quantitative research firm based in Istanbul, Turkey. Most of our efforts are concentrated on developing descriptive methods for the actions of financial markets. Despite being based in Eastern Europe, our models are primarily based on and apply to the American markets.
Contrary to many other algorithm developers in our field, we try to adopt simplistic approaches in our models. The incredible rise in the speed and efficacy of trading systems have lead many people to adopt algorithms that try to exploit very small opportunities for profit. We believe that is the job of market makers, not traders. In our studies we believe in the strength of the "parsimonious principle", which states that among theories that equally describe a phenomena, the simpler one is the better one. That approach enables us to develop theories that are more suitable for the real-time trading situations where the effects of transaction costs and leverage are prominent. We also believe that the financial crisis of 2008 is a very important opportunity to test long-only trading algorithms. Since that event was such a rare and catastrophic one, it enables us researchers to test our models on a real-world worst case scenario and we try to take full advantage of it.
To commit to our parsimonious principles and to develop models with real-world applications, we use a three part elimination system to test various descriptive models that we come up with. Through various criteria we also ensure that our models are not subject to various behavioral and financial biases. Fortunately we have been able to develop three separate models that have produced in excess of 6.5% per annum above the appropriate benchmarks, with less volatility than the benchmark itself. We are slowly trying to transform these models into actual financial products.
The three major criteria that we test our models against are:
A maximum of five primary variables and applicability over at least 10 years without modification
What is meant by a "primary variable" is a variable that is not derived from other variables. We limit our models to a maximum of five of these variables in our models. Most researchers suffer from the bias of fitting the model on to past data. By using overly complicated algorithms, the results are basically custom made to fit such data. However, the challenge is to find a descriptive model that fits nicely over a long term, with very minimal number of variables. Only that way, it is possible to come up with an algorithm that has real predictive power.
Minimization of trading signals and transaction costs
In real life conditions, transaction costs are a real drag on theoretical returns. Actually, it is safe to say that many computerized trading models are completely invalidated in real life situations due to the effect of transaction costs. To make sure our models does not suffer from this bias, we integrate the effect of transaction costs with a large margin of safety into our models. Such an approach ensures our products are more likely to succeed when they actually come to market.
Leverage is an inseparable element of financial trading for some investors. To ensure that our products have wide applicability, we also optimize our models for the effect of leverage. That process usually involves lowering the volatility of the results. Of course, the trick is to lower volatility without sacrificing returns, and we believe we are very successful in this area as well. We test our models rigorously, for various leverage models. Many of our models have survived up to one to three leverage on equity markets without triggering a single margin error over a 13 year period including the financial crisis of 2008, which is a great feat needless to say.
Dr. Ali Nail Kubali
A graduate of the prestigious Robert College in Turkey, Dr.Kubali has gone on to complete his doctorate in Economics in the United States with a “Fulbright” scholarship in St. Louis University. After completing his studies in Economics, he has served in a public organization in the US, responsible for the development of economically underdeveloped regions of the world and has gone on to serving as the partner of a financial and executive consulting firm in the United States between the years 1965 and 1971. After returning to his home country in 1974, he has served on the boards of numerous Turkish conglomerates and has provided consulting services with his consulting firm NCM Consulting. Dr. Kubali is also the Honorary Consulate of Denmark in Izmir since 1988.
He has been named one of the top ten most influential people of the 80s in Turkey, along with the legendary Prime Minister of Turkey Turgut Ozal. He has also been awarded the "J. Boland Outstanding Alumni" award by St. Louis University, his alma mater, and honored with the title of "Knight" and "Knight First Class" of The Order of the Dannebrog by Queen Margretha of Denmark.
Head Of Research
A graduate of University of Virginia in the United States, Mr. Sozen has first started his career in M&A consultancy in 2006. He has held positions in the largest M&A advisory firm by deal volume in Turkey, 3 Seas Capital Partners, between the years 2007 and 2008. Since 2008 he has become a professional trader, as well as passing the Level III examination of the CFA program, which is considered to be the leading finance certification in the world. Aside from his trading activities he has provided consulting services to some of the leading corporations and funds in Turkey such as Kiler Holding, Reysas Holding and ADM Capital. His services to these outside customers has been in the area of currency hedging and mezzanine finance.
Mr. Sozen has been chosen to attend many Mathematics and Economics competitions during his academic career. Since 2010, he has been using his competency in mathematics to develop and rigorously test financial models.