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Introduction to algo quant, an integrated trading research tool

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Haksun Li haksun.li_at_numericalmethod.com www.numericalmethod.com Data sources Library of signals Strategy templates Sample strategies Performance measures In-sample ... – PowerPoint PPT presentation

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Title: Introduction to algo quant, an integrated trading research tool


1
Introduction to algo quant, an integrated trading
research tool
  • Haksun Li
  • haksun.li_at_numericalmethod.com
  • www.numericalmethod.com

2
An Integrated Suite of Back Testing
  • Data sources
  • Library of signals
  • Strategy templates
  • Sample strategies
  • Performance measures
  • In-sample calibration
  • Out-sample back testing

3
An Integrated Suite Strategy Analysis
  • Bootstrapping
  • Customized order book
  • Scenario analysis
  • Auto strategy generation

4
Library of Components
  • Algo Quant is more than an application.
  • Algo Quant is Java library of components that you
    can reuse to build your own trading applications,
    such as
  • A customized back tester
  • A quantitative strategy research tool
  • An algorithmic trading system for automatic order
    execution

5
SuanShU
  • Algo Quant is backed by an extensive library of
    numerical algorithms for building mathematical
    trading model.
  • Markov chain
  • Hidden Markov model
  • Kalman filter
  • Cointegration
  • Regression analysis

6
Data Sources
  • Yahoo!
  • Gain Capital FX rates

7
Data Processing
  • Cleaning
  • Extraction
  • Equi-time
  • Daily
  • Weekly
  • Filtering
  • Moving average

8
Signal Library
  • Open-High-Low-Close (OHLC) bar
  • Arithmetic moving average
  • Exponential moving average
  • RSI

9
Strategy Templates
  • One of the objectives of Algo Quant is that you
    can prototype a quantitative trading strategy
    very rapidly.
  • Reduce the time to testing out an idea.
  • Reduce the time to production.

10
Message Based Ststem
  • Algo Quant is a message based system.
  • event driven
  • To create a strategy, you only need to handle the
    events that concern you.
  • write handlers

11
Signal vs. Strategy
  • A signal takes prices (and maybe other data) to
    generate buy, sell signals, etc. It monitors and
    describes an aspect of the price process.
  • A strategy, interacts with the market by sending
    orders. It determines when/what to buy and sell
    and how much.
  • A strategy is a composition of signals which look
    at different aspects of the market.

12
Performance Measures
  • PL
  • Max drawdown
  • Sharpe ratio
  • Omega
  • Your own customized measures

13
Calibration
  • Algo Quant has a suite of optimization tools to
    search for optimal parameters for a strategy with
    respect to the (historical) data for a given
    objective function.
  • Optimizers
  • mixed integer non linear programming
  • Objective functions
  • Sharpe Ratio
  • Omega

14
Back Testing
  • Algo Quant is a very efficient back tester as it
    runs on multiple cores.
  • multiple set of parameters
  • expected PL
  • variance of PL

15
Customized Order Book
  • You can customize the way an order is handled to
    simulate different execution assumptions.
  • FIFO order book
  • 100 execution ratio
  • limit vs. market orders

16
composite strategy
  • composite strategy simple strategies
  • A successful composite strategy may consist of
    not-so-successful strategies.
  • A composite strategy is explainable by its
    constituent simple strategies.
  • A composite strategy accounts for more market
    factors, hence more comprehensive.

17
Sample composite strategy
  • The mean reverting strategy makes small money
    most of time but loses very big money on trend.
  • The trend following strategy loses small money
    most of the time but makes big money on trend.

18
Sample composite strategy
  • We combine them together to form a new strategy
  • run the mean reverting strategy except when there
    is an expected news/announcement event, e.g., NFP.

19
auto strategy generation
search for a combination of simple strategies
add the successful strategy to the pool so it
becomes another simple strategy
strategy verification
backtester
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