Quality Money Management : Process Engineering and Best Practices for Systematic Trading and Investment

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relative importance of individual items. The Modified Delphi approach begins with a pre-

defined set of items, which typically better controls the process.

The Wideband Delphi method, made popular by Barry Boehm in Software Engineer-

ing Economics , uses interaction and consensus to forecast effort, therefore lending itself

well to trading/investment system development projects. Boehm ’ s steps are

● Panel coordinator distributes a form outlining a specification and a section for

estimation.

● Panel coordinator convenes a meeting where panel members discuss issues related

to forecasting and estimation.

● Panel members then fill out their forms anonymously.

● Panel coordinator prepares and distributes a summary of the individual written

estimates.

● Panel coordinator convenes another group meeting to focus discussion on points

where summary estimates vary significantly.

● Panel members fill out forms again and the process is run again until consensus is

reached.^9

The Wideband Delphi method is useful because it raises and builds consensus on several

issues important to the trading/investment system development process, including work

breakdown structures, scheduling, project assumptions, as well as risks to the develop-

ment process. Wideband Delphi can sit on top of other estimation methods, for example,

a scoring model, improving them by incorporating additional participants, and iterative

feedback and refinement.

2.9. Design and Development

Design and development is the set of processes that transforms requirements, generally

defined in a Money Document, into a working trading/investment system. This includes

ongoing position and risk management. Design and development is sometimes referred to

as product realization.

2.10. Document

The American Heritage Dictionary defines a document as “ a written or printed paper that

bears the original, official, or legal form of something and can be used to furnish decisive

evidence or information. ”^10 Our methodology uses documents to verify that product teams

follow proper processes and procedures over the stage and, furthermore, that the outputs of

that stage meet the input requirements of the following stage.

2.11. Financial Engineering

According to the International Association of Financial Engineers website, the primary

definition of financial engineering is as follows:

Financial engineering refers to the application of various mathematical, statistical

and computational techniques to solve practical problems in finance. Such problems

2.11. FINANCIAL ENGINEERING