294 Index
stationary system 24
statistical arbitrage 63–4
statistical process control (SPC) 25
analysis 43, 251–62
assumptions 252, 255
attribute charts 255–8
attribution metrics 261
best practices 262
control charts 254–61
CUSUM charts 260
d charts 258–9
EWMA charts 260
history 252–3
out-of-control states 239
p charts 258–9
process capability 260–1
process view 253–4
R charts 255–8
Sarbanes-Oxley 255
single metrics 261
testing 167–8
tools 253
VaR metrics 261
variables charts 255–8
X bar charts 255–8
stock data 141
end-of-day stock prices 152–4
point-in-time data problem 152–4
strategy
new strategies 84–5
top management 49
trading/investment 36–8
survey data needs 140–4
survey data vendors 140–4
synchronizing data 155
system architecture 41
best practices 203
business rules packages 200–1
design process 195–9
designing 193–203
high frequency systems 200
interface packages 201
network architecture 181, 202
SAD 199–200, 208
software tiers 194–5
system, defining 21–2
System of Profound Knowledge (SoPK) 3
systematic approach, trading/investment
systems 10
systematic innovation 1–2target audience, this book ’ s 11
target market, Money Document 71
teams see development team; product teamstechnological infrastructure requirements,
Money Document 75–6
technology specifications
best practices 191
buy vs build 187–8
collaborative planning 186
communication 188–9
deadlines 188–9
documenting 183–91
planning 183–91
trading/investment systems 40–1
terminology 15–27
test design, design process 196–7
test runs, performance checking 121
testing
see also backtesting; performance
checking
best practices 163
data 216
data proportions 159–60
equity portfolio systems 159
fixed income portfolio systems 160
GUIs 216
high frequency systems 159
in-sample/out-of-sample tests 39, 157–63
in-sample results vs prototype 167
large sample 160–2
methodology 158–60
regression testing 166–8
return windows 160
Sarbanes-Oxley, pre-/post- 159
shadow trading 167–8
SPC outputs 167–8
trading/investment algorithms
180–1
testing stage, life cycle 21
time line, Money Document 76
timeboxing 25
top-down innovation 20, 57, 68
top management 25
gate meetings 49–50, 125
leadership 50
product teams 50–2
role 49–52
strategy 49
track record simulation, backtesting 135–6
trade cost analysis, documenting 155–6
trading/investing
defining 25–6
full trading 26
probationary trading 26
shadow trading 25
stages 25–6
trading/investment algorithms 180–1