ALGORITHMICTRADINGCOURSEMODULE2 BACKTESTING&QUANTITATIVETRADING(2NDINTAKE)

6,1214Aug2011 ThomsonReuters,OneRafflesQuay Learnhowtocarryoutrigorousquantitativeanalysisofatradingstrategy ReceiveacomplimentarycopyofDrErnestChansQuantitativeTrading:HowtoBuildYourOwn AlgorithmicTradingBusiness TechnologyPartners Classsizeiscapped 50%fundingfromFinancialTrainingSchemegrants (basedonMASqualifyingcriteria) SGXTradingRepresentativeswhocompletethiscourseareeligibleforone ContinuingEducationProgramme(CEP)credit

Algorithmic trading often involves the use of mathematical models to describe and predict market movements. Thesemodelsarethenimplementedoncomputersystemsforautomaticexecution.Thejobofanalgorithmictrader istofirstdevelopamarketintuitionorideaofhowpricesshouldevolve.Usingmathematics,thetraderthenturns the idea into a quantitative model for analysis, back testing and refinement. When this quantitative model proves likelyto beprofitableafterrigorousstatistical testing, the traderimplementsthestrategyoncomputer systems for execution. This2.5dayintensivecourseisdesignedtoprovideparticipantswithagoodunderstandingofthecoreconceptsand quantitativetechniques used in the backtesting and optimization of trading strategieswith particular emphasison pairtradingandrelatedstrategies.ParticipantswilluseMATLABsoftwaretosolvebacktestingproblemsusingreal marketdata.ParticipantswithnoorlimitedknowledgeinMATLABprogrammingshouldattendouroptional0.5 day workshop on MATLAB programming. The workshop will provide an overview of MATLAB syntax and a reviewofthekeyfunctionsrequiredinthebacktestingcourse;inaddition,afewuserdefinedfunctionswillalsobe developed. Attheendofthecourse,participantsareexpectedtodevelop: anunderstandingofthecoreconceptsinquantitativetrading a deep appreciation of the process of using mathematics and statistics to analyze the profitability of a trading model handsonexperienceofhowbacktestingisdone anunderstandingofpairtradinginstocks,ETFs,futuresandcurrencies

Introduction

Outcome

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HighlyRecommendedfor

Traderswishingtoapplytheirmathematicalandstatisticalstrengthsinthetradingarena Algorithmictradersseekingadeeperappreciationoftheroleofquantitativetraders Regulators,riskmanagersandauditorswhoneedagoodunderstandingofthenatureofquantitativeanalysis Anyonewhoaspirestobecomeaquantitativetrader

PreferredBackground

MATLABprogrammingexperienceisrequired(ParticipantswithnobackgroundinMATLABshouldregisterfor theMATLABworkshop. Someexperienceintradingispreferredbutnotessential Somebasicstatisticsbackground

Contents

MATLABWorkshop(optional) QuicksurveyofMATLABarrays&subarrays oArithmeticoperations oFunctions oDataimport oGraphs Usefuluserdefinedfunctions oBackshift oMovingAvg Topic1: Introductiontobacktesting Whatisbacktesting? Theimportanceofbacktesting Thelimitationsofbacktesting:asurveyofcommonpitfalls Howtodecidewhethertobacktestastrategy:aseriesofexamples Criteriaforchoosingabacktestingplatform:prosandconsofvariousplatforms Topic2: TheuseofMATLABintrading WhyisMATLABsuperiortoExcel/VBA/Java/C++/C#forportfoliotradingresearch? Overviewofcapabilitiesasresearchandbacktestingplatform TheprosandconsofusingMATLABasautomatedtradingplatform Topic3: Nutsandboltsofbacktesting Backtestingasingleinstrument Performancemeasurement:commonmetrics Transactioncosts:discussionofvarioussourcesoftransactionscosts Choosingahistoricaldatabase:importantpitfallstoavoid Reuterspresentationontheirdatabases Backtestingaportfolio Strategyrefinement Waystoavoidlookaheadanddatasnoopingbiases Whyislivetradingperformanceusuallyworsethanbacktestperformance? Topic4: Kellyformula RiskmanagementusingKelly
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CapitalallocationusingKelly Topic5: Theoreticalfoundationofpairtrading Conceptofstationarity,andwhyitisuseful Conceptofcointegration,andwhyisituseful Howiscointegrationdifferentfromcorrelation? Howarestationarityandcointegrationdifferentfrommeanreversion? Testformeanreversion:computinghalflifebasedonOrnsteinUhlenbeckformula Whyiscomputinghalflifebetterthancomputingaverageholdingperiod? Topic6: Tradingapplicationsofstationarity Statisticaltestforstationarity:ADF Topic7: Cointegrationandpairtrading Statisticaltestsforcointegration:CADFandJohansen Findingthebesthedgeratio Backtestvs.cointegration PastFuture Parameterlesspairtrading Stoploss? Tradingcointegratedtriplets Whatarethebestmarketstopairtrade?Prosandconsofeachmarket Automatedpairtrading Topic8: Relatedstrategies Indexarbitrage:Tradinganindexagainstabasketofitscomponentstocks Statisticalarbitrage Momentumvs.meanreversal Momentumpairtrading:examples Otherstockmeanreversiontrades Topic9: ReuterspresentationonQuantitativeResearch&Tradingworkflow

Trainer

Dr.ErnestP.CHAN IndustryFellow,NTUSGXCentreforFinancialEducation Dr. Ernest P. Chans career since 1994 has been focusing on the development of statistical models and advanced computeralgorithmstofindpatternsandtrendsinlargequantitiesofdata.Hehasappliedhisexpertiseinstatistical patternrecognitiontoprojectsrangingfromtextualretrievalatIBMResearch,miningcustomerrelationshipdataat MorganStanley,andstatisticalarbitragetradingstrategyresearchatCreditSuisseFirstBoston,MapleridgeCapital Management,MillenniumPartners,andMANEFundManagement. While intheHumanLanguageTechnologiesgroup at IBMT.J.Watson Research Center (YorktownHeights,NY), ErnestspearheadedIBMsresearchefforttodevelopasystemforsearchinglargetextdatabasessuchastheWorld Wide Web, catapulting IBMs reputation as a top player in the field. His system was placed seventh among some forty competitors in a competition sponsored by the National Institute of Science and Technology and the Department of Defense in 1996. At the Data Mining group in Morgan Stanleys headquarter in New York, Ernest pioneered the application of some of these sophisticated statistical algorithms to the complex task of extracting customerrelationshipsintheMorganStanleycustomeraccountsdatabase.
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 ErnestwasinvitedtojoinaproprietarytradinggroupatCreditSuisseFirstBostoninNewYorkin1998todevelop statisticalmodelsforfuturestrading,stockpairtradingaswellastradingbasedonearningsrevisions,surprisesand analystrecommendationchanges.HejoinedMapleridgeCapitalManagementCorp.in2002asaSeniorQuantitative Analystworkingonfuturestradingstrategies,andthenMapleSecurities/MANEFundManagementInc.in2003asa seniorresearcherandtrader. ErnestconsultsformoneymanagementcompaniesandalsomanagesvariousaccountsincludingEXPQuantitative Fund,L.P.whichhecofounded.Hehasservedasanexpertwitnessinamatterrelatedtoalgorithmictrading.He writestheQuantitativeTradingblogwhichissyndicatedtowww.tradingmarkets.comandYahooFinance,andhas published in the Automated Trader magazine. He was quoted by the New York Times and CIO Magazine, and interviewedonCNBCsClosingBellprogramandTechnicalAnalysisofStocksandCommoditiesmagazineontopics related to quantitative trading. He is the author of Quantitative Trading: How to Build Your Own Algorithmic TradingBusinesspublishedbyJohnWiley&Sonsin2008. ErnestholdsaBachelorofSciencedegreefromUniversityofTorontoin1988,graduatingwithHighDistinctionand receiving the Lieutenant Governors Gold Medal. He also holds a Master of Science (1991) and a Doctor of Philosophy(1994)degreeintheoreticalphysicsfromCornellUniversity.Inrecognitionofhisexpertiseinstatistical data mining, he was invited to serve on the Program Committees of the International Conference of Knowledge DiscoveryandDataMiningin1998andalsooftheSPIEConferenceonDataMiningandKnowledgeDiscoveryin 1999. He was an invited panelist on Effective Arbitrage Strategies at the ETF Evolution 2007 Summit. He was an invitedspeakerattheAutomatedTradingconferenceinLondon,UK,inOctober2009.Heconductsworkshopson topicsfromPairTradingtoBacktestinginNewYork,LondonandHongKong.

TimeandVenue

ThomsonReuters,OneRafflesQuay,#2801NorthTower,Singapore048583 Time 6August2011 0930hrs1530hrs 12August2011 1830hrs2130hrs 1314August2011 0930hrs1715hrs

FeesandRegistration

SeminarSessionPast Participants of NSCFE Courses & EarlyBirdDiscount(Paymentmadebefore17June2011) NonSGXmember SGD3,480(excluding7%GST)beforefundingsupportfromFTSgrants1 SGXMember SGD3,080(excluding7%GST)beforefundingsupportfromFTSgrants1

SeminarSessionProgramFees NonSGXmember SGD3,980(excluding7%GST)beforefundingsupportfromFTSgrants1 SGXMember SGD3,580(excluding7%GST)beforefundingsupportfromFTSgrants1

MATLABWorkshop(Optional) SGD400(excluding7%GST)beforefundingsupportfromFTSgrants1

*7%GSTisnotapplicableforoverseascompaniessponsoringtheiremployees. *Feesincludelunches,teabreaks,coursematerialsandtheuseofanindividualhandsontradingterminal.

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TheMonetaryAuthorityofSingapore(MAS)administersFinancialTrainingScheme(FTS)grantstofinancialsector organisations that sponsor eligible Singapore based participants to training programmes that meet the qualifying criteria.Formoredetails,pleasevisitwww.mas.gov.sg,orcontacttheMASat62299396orfsdf@mas.gov.sg. ToRegister: Logontowww.ntusgxcfe.ntu.edu.sg/courses.asptoregister Closingdateforallregistrationis08July2011 Allpaymentsmustbereceivedby15July2011 ForEnquiries: PleasecontactMsMichelleChahorMsJoanSeeattel:67905736/6078oremailnscfe@ntu.edu.sg

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