Quant funds tackle chronic overfitting in crypto strategies
Firms adapt backtests and tread lightly to address “huge” overfitting risk, magnified by scarce data
Quantitative funds have long been haunted by the spectre of overfitting – a model performing well in backtests that use historical data, but not when applied to current market conditions. And if a fund trades crypto rather than traditional assets, the risk is even higher.
One of the main reasons overfitting has plagued crypto markets is paltry historical data, but quant funds are finding creative ways round the problem. Some have beefed up their backtests, while others are sticking to tried and
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