Hi @richai. I would like to explain my concerns one more time in more clear way. I got your points and I’m completely agree with that. But my concern about another type of situations: When a user’s model contribute in increasing of metamodel’s sharpe. The most extreme example if a user submit a model that’s strongly correlated with the metamodel, have the same expected return of correlations, but has a much better Sharpe at the same time.
What do we have in the results:
In old payout system, the user will be ok. He will get the same payout as the person who submits metamodel ( ), but payment will be less volatile due to higher sharpe for the first user and everyone happy here. In the new MMC system, the higher sharpe model user submits - the more volatile payment will be. That is what I really don’t like here. If someone works on MMC-profitable models, he has to keep sharpe as much close to metamodel as he can. Even in not such extreme cases, when someone developed model low-correlated with metamodel - his MMC payment probably will be more volatile for model with higher sharpe even the rest of performance metrics will be exactly the same.
And I don’t argue here about the topic - should more stable models get higher payout than less stable models (however it is also important question). My main point here - more stable models should get more stable payout as it was in correlation-based payout system. Current MMC payment system just do the opposite thing.