EdgeWare FastBreak Pro Version 6.2 - Manual (Page 81)

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In this example, the parameter values are all increased by 5%. The strategy performance
from this run is saved. Then a second evaluation is made, but this time the trading
parameter values are reduced by 5%. The performance results are also saved.
At this point FastBreak Pro evaluates robustness in one of two ways. The user can
control which method, if any, is used with the following option on the GA Screen:
If the user selects the “Lowest” option, the software looks at the two parameter variation
run results, selects the one with the lowest performance and divides the return by the
return from the original run. For example, let’s assume the original run had an annual
return of 24%. Increasing the parameters by 10%, the return was 20%. Decreasing the
parameters by 10% resulted in a return of 18%.
The 18% return is the lowest and the
software divides 18% by 24% giving a result of 0.75.
FastBreak Pro now compares the 0.75 result to the user-defined Maximize Robustness
value, which in this case was set to 0.85. Since 0.75 is worse than 0.85, FastBreak
applies a penalty to the strategy return. The penalty is simply the 0.75 divided by 0.85
and it is applied to the original strategy performance, i.e., 24%, to obtain the Adjusted
Performance. In numbers:
0.75/0.85 x 24 = 21.2%
If the worst case ratio had been greater than 0.85, then no penalty would be applied.
Similarly, if the Maximize Robustness value was set to 0.75 or less, then no adjustment
would be made.
The robustness penalty is one of several penalties that can be applied to obtain a strategy
Adjusted performance. All the other user-defined performance criteria (UPI, MDD, and
switches per year) can result in an adjustment to the actual system performance. All these
adjustment penalties are multiplied together and applied to the original actual
performance.
If the user selects “Average” to maximize robustness, the penalty calculation is slightly
different. All three strategy return values are averaged and that average is divided by the
original performance value. Using the above example:
Average return = (24% + 20% + 18%)/3 = 20.7%
The performance ratio = 20.7%/24% = 0.86