BACKGROUND


Introduction

Precious Metals, particularly gold, have always carried value and has been a sound investment for thousand of years (it has even beaten the equity market over the last 20 years). Gold has been used in the middle age as a currency (still some coins are made of gold), after used as a peg for all major currencies but now just seen as a currency of last resort. Central banks still hold massive reserve of gold. Gold is in limited supply and only can become more available through mining, currencies can be printed by central banks. Silver, Platinum and Palladium are also precious metals but are also used for industrial purpose. They are in particular key components for solar panel or for reducing carbon emissions in the automotive industry.

In this competition, the objective is to allocate between the 4 precious metals. Find the right timing to be long gold versus industrial precious metals (which are usually more volatile), take advantage of relative value opportunities in order to build a sound portfolio investment strategy that outperform gold in the long term.

This quant competition is open to any participant as an individual or as a team. The objective is to find the best performing allocation strategy within :

  • Gold
  • Silver
  • Platinum
  • Palladium

About the sponsor

Global Precious Metals provides a competitive and easy way to purchase precious metals and store them in fully insured and segregated vaults. It sources precious metals (Gold, Silver, Platinum, Palladium) exclusively from refiners accredited by the London Bullion Market Association (LBMA) and the London Platinum and Palladium Market Association (LPPM).


OBJECTIVES


Description

Act as if you were a precious metals portfolio manager willing to build a fully invested diversified precious metals strategy. The strategy will aim at taking advantage of the asynchronous performances between the four most important precious metals in the world.

Use the tutorial notebook to get started:

Investment universe

The Investment Universe is composed of 4 investable indices (long and cash free) tracking each precious metal below by rolling systemically futures contracts. The universe, along with other data, can be called using the function GetTickersPreciousMetalAllocation.

Ticker Precious Metal
GC Gold
PA Palladium
PL Platinum
SI Silver

Benchmark

Gold Fixing Price at 3:00 P.M. (London time) in London Bullion Market, based in U.S. Dollars.

Strategy definitions

A Strategy is a portfolio of investable precious metal Indices. The weights are managed dynamically on the basis of an algorithm which generates transaction signals.

Each time the weights are set, the following constraints must be satisfied (i.e. the constraints are not checked between 2 set dates):

Precious Metals Min Max
Gold 0% 100%
Silver 0% 50%
Platinum 0% 35%
Palladium 0% 35%
Total 100% 100%

Additional notes:

  • First weights have to be generated before/on 2004-01-02 (1 year calibration/training. Rolling/expanding windows are allowed)
  • Sharpe Ratio for the backtest period has to be > 0.25
  • Payout has to be replicable and contain no lookahead bias
  • All time series data has to be called via the DataFeatures object - no data calls in your payout.
  • Whole notebook has to be ran under 15 mins (excluding the testPreciousSubmission function). Training of models/processing of data inclusive.
  • Only notebook that are well documented, code with clear comments will be accepted. The notebook need to explain the rationale of your approach and why you are using the techniques. A lack of clear documentation can induce disqualification even if your version of notebook has been accepted, make your code easily readable and clear to understand, create functions or classes to make your notebook cleaner. Also, put potential references in your notebooks.

Strategy transactions

Transaction costs:

  • 25 basis points (bps) for the amount being transacted. As an example, if you sell 10% of Gold and buy 10% of Silver, the cost will amount to 20% x 25 bps = 5 bps.
  • Rebalancing penalty: 2 basis points on the total AUM, each time you have a date with a set of weights, it will be considered as a 'rebalancing' day and you will incur the penalty. Please check the example notebook and check the page Rebalancing and transactions costs

Transaction frequency: The maximum transaction frequency is daily (no intraday trades). All trades are executed at market close prices.

Transaction signals: Transaction signals must be based on data available at close-of-business on the day prior to the execution.

Backtest period

The initial in-sample period runs from 1st Jan 2003 to 31st Dec 2014, the complete in-sample period is from 1st Jan 2003 to 31st Dec 2016.

Note: As soon as your first submission is approved, you can revise it as much as you want and you will get access to the complete data set.

Submissions

You must use Notebooks to submit your solutions. Use a separate notebook for each solution. You can submit a maximum of two notebooks (equivalent to 2 solutions) per competition. However, there is no limitation in the number of revisions you can make on a submitted notebook.

Please visit our Submissions page for all details on how to submit.


SELECTION CRITERIA


The strategies will be ranked based on the weighted arithmetic mean of their various rankings as follow:

Performance Metrics Metric ranking Weight
Information Ratio IR 40%
Sharpe Ratio SR 40%
Minimum Rolling Sharpe Ratio MRSR 20%

Note: The Minimum rolling Sharpe ratio is calculated over a period of 3 years.

Example:The strategy is ranked according to the different metrics as follow

  • Information ratio: 2nd
  • Sharpe Ratio: 10th
  • Min rolling Sharpe ratio: 4th

Its average ranking will be (40% x IR) + (40% x SR) + (20% x MRSR) = (0.4 x 2) + (0.4 x 10) + (0.2 x 4) = 5.6 to be compared with other strategies.

Note:

  • The period of the calculation for the performance metrics will not be disclosed.
  • If 2 strategies have the same average ranking, the strategy with the better ranking for the information ratio will be ranked higher.
  • The winning strategies will be solely determined on the methodology explained in this section
  • If there are multiple versions of the same notebook, only the latest version will be taken into consideration

AWARDS


The prizes are:

Winner: 100g ABC Bullion Cast Bar Gold

Runner up: Canadian Maple Leaf ½ oz Gold Coin

Awards_PM_Alphathon.PNG

Note:

  • Free delivery for the following countries considered: Singapore, Hong Kong, Switzerland, United Kingdom and USA
  • As of 25th of November, one ounce of gold worth USD$1,812.95. The approximative value of the first prize is then USD$ 6,395 (100g = 3.5274oz) and the second prize USD$ 906.
  • The winner will receive real gold but can choose to be paid in cash instead (after deduction of costs and taxes), the value of the winning prize will be converted in USD at the market price.
  • If the winner is a team, the payment in cash will be split to each individual team participant equally.

TIMELINE


PM NewTimeline.JPG

DATA


The only available input data for this competition are

  1. Close price of precious metal tickers listed in the Investment Universe section above
  2. Open Price, High Price, Low Price, Close Price, and Volume of each first generic futures contract
  3. Price of the following macro indices: S&P 500 Index, US 10-year T-Note yield, US 10-year TIPS yield, DXY Curncy and VIX Index

The data can be called using the function GetTickersPreciousMetalAllocation.

ticker field description
GC BB Live Gold
PA BB Live Palladium
PL BB Live Platinum
SI BB Live Silver
GC1 Comdty OHLCV Gold 1st generic futures contract
PA1 Comdty OHLCV Palladium 1st generic futures contract
PL1 Comdty OHLCV Platinum 1st generic futures contract
SI1 Comdty OHLCV Silver 1st generic futures contract
SPX Index OHLCV S&P 500 Index
USGG10YR Index OHLC US 10-year T-Note yield
GTII10 Govt Close Price US 10-year TIPS yield
DXY Curncy OHLC US Dollar Index
VIX Index OHLC 1m Implied Volatity on S&P 500

You can also visualize the data using our data search feature.


ALPHIEN POINTS


Submit early to earn points that will help you win the competition !

  • Starting from Wednesday 9th December and every Wednesday until the 30th of December, the top 5 users ranked by the selection criteria will earn Alphien Points that allow them to unlock special features for the precious metal competition !
    • 1 Extra Submission. Remember that you can only submit two solutions by default
    • 1 Special consultation with a Senior Quant
    • 1 Fastpass to bypass the reviewing queue and receive a guaranteed feedback within 24 hours. Without a fastpass it can take some time before you receive proper feedback because strategies need to pass an extensive checklist before being approved.
  • Unlock these features directly from your user profile page


Weekly point rewards

Ranking Points
1 15
2 11
3 7
4 3
5 1

GUIDELINES


Support tools

  • After you have joined the competition, click the "get started" button. You will be redirected to your dashboard. In "Public Notebooks", filter notebooks by competition tag using the "Precious Metals Allocation" tag.
  • Read about how to avoid look ahead bias to maximise your chances to win.
  • Use the forum to find help from the community or from Alphien support team.
  • Click on Precious Metals Competition Critical Steps to get an overview of all the steps for this competition

Tips and advice

  • Use AlphienLab to conduct your research.
  • Once you have fine-tuned your model, document it in a notebook and submit the notebook for our review.
  • We highly recommend you use the forum as much as you can to find help.

RULES


The Alphathon will be open to any Participants (academic or nonacademic) in the world, but Alphien reserves the right to reject some applicants if terms of the platform are violated. In particular you must not copy code or intellectual property which is not your own or is not open sourced. You can not participate as a professional if your employer can claim ownership in any part of your work on the Alphien platform, in case of conflict please contact and discuss with the Alphien team. Alphien is open to free scientists who owns their intellectual property.


LEGAL


Please refer to Alphien Terms of Use.