Principles of Quantitative Development

253 Pages·2010·4.898 MB·English

by  Thulasidas, Manoj

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Principles of Quantitative
Development
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ForothertitlesintheWileyFinanceseries
pleaseseewww.wiley.com/finance
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Principles of Quantitative
Development
Manoj Thulasidas
A John Wiley and Sons, Ltd., Publication
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Thiseditionfirstpublished2010
(cid:1)C 2010ManojThulasidas
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LibraryofCongressCataloging-in-PublicationData
Thulasidas,Manoj.
Principlesofquantitativedevelopment/ManojThulasidas.
p.cm.
ISBN978-0-470-74570-0(hardback), ISBN978-0-470-66737-8(ebk),
ISBN978-0-470-97151-2(ebk), ISBN978-0-470-97152-9(ebk)
1.Speculation. 2.Riskmanagement. I.Title.
HG6015.T48 2010
332.1068(cid:2)1–dc22
2010005779
AcataloguerecordforthisbookisavailablefromtheBritishLibrary.
ISBN 978-0-470-74570-0
Setin10/12ptTimesbyAptaraInc.,NewDelhi,India
PrintedinGreatBritainbyTJInternationalLtd,Padstow,Cornwall,UK
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Contents
ListofFigures,TablesandBigPictures xi
Preface xv
1 Introduction 1
1.1 Whatisatradingplatform? 1
1.1.1 Modelarchival 1
1.1.2 Incrementaldeployability 2
1.1.3 Livedatafeeds 2
1.1.4 Tradepersistence 2
1.1.5 Regularprocessing 3
1.2 Quantsandquantitativedevelopers 3
1.3 Needforspeed 4
1.4 Implementationoptions 5
1.4.1 Outsourcetovendor 5
1.4.2 UsevendorAPI 5
1.4.3 Developin-house 6
1.4.4 Replacevendedsystems 7
1.5 Currenttrends 7
1.6 Technicalandbusinessaspectsofplatformdesign 8
1.7 Importanceofprocesses 10
1.8 Objectivesandorganization 12
Quiz 13
2 OverviewofBanking 15
2.1 Theoffices 16
2.2 Frontoffice 16
2.2.1 Economists 18
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2.2.2 Structurers 18
2.2.3 Sales 18
2.2.4 Tradingdesks 19
2.2.5 Deskquants 19
2.2.6 Platformorquantitativedevelopers 19
2.2.7 Deskriskmanagement 20
2.3 Middleoffice 20
2.3.1 Productcontrol 20
2.3.2 Treasurycontrolunit 22
2.3.3 Marketriskmanagement 23
2.3.4 Creditriskmanagement 23
2.3.5 Operationalriskmanagement 24
2.3.6 Ratesmanagement 26
2.3.7 Staticdatamanagement 26
2.3.8 Complianceandreporting 27
2.3.9 Marketriskmanagementanalytics 27
2.3.10 Assetandliabilitymanagement 27
2.4 Backoffice 29
2.5 Supportingunits 29
2.6 Summary 30
Quiz 31
3 TradeLifeCycle 33
3.1 Pre-tradeactivities 34
3.2 Inception 35
3.3 Validation 38
3.4 Regularprocessing 40
3.5 Life-cycleevents 43
3.6 Terminationandsettlement 45
3.7 Post-tradeActivities 47
3.8 Summary 47
Quiz 48
4 TradePerspectives 49
4.1 Trade-centricview 49
4.2 Model-centricview 51
4.3 Product-centricview 53
4.4 Asset-classview 54
4.5 Queuesandstatusflags 55
4.6 Aggregateviews 57
4.7 Bottom-lineview 60
4.8 Otherperspectives 61
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Contents vii
4.9 Summary 62
Quiz 63
5 ProgrammingLanguages–BasicsandChoices 65
5.1 Languagechoice 66
5.2 Basicsofcomputing 67
5.2.1 Developmentcycle 67
5.2.2 DependenciesandMakefiles 69
5.2.3 Lexicalstructureofaprogramminglanguage 70
5.3 Object-orientedlanguages 75
5.3.1 Basicsofobject-orientedmethodology 75
5.3.2 Advantagesanddisadvantagesoftheobject-oriented
approach 78
5.4 Functionalprogramming 79
5.5 Summary 84
Quiz 85
6 TradingPlatformDesign 87
6.1 Generaldesignconsiderations 87
6.1.1 Maintainabilityanddocumentation 88
6.1.2 Scalabilityandextensibility 89
6.1.3 Securityandaccesscontrol 90
6.2 Architecturecomponents 91
6.2.1 Traderepresentation 92
6.2.2 Marketrepresentation 94
6.2.3 Staticdatamanagement 97
6.2.4 Quantlibrary 97
6.2.5 Tradetransformationsandoperations 98
6.2.6 Settlementtriggersorpathways 100
6.2.7 Batchprocessingandgridcomputing 102
6.2.8 Creditreplication 106
6.2.9 Securityandauditmodel 107
6.2.10 Documentationandsupportmodel 110
6.3 Examplearchitecture 111
6.4 Advancedarchitecture 113
6.5 Summary 117
Quiz 117
7 ComputingPatternsforTrading 119
7.1 Fac¸adepattern 121
7.2 Visitorpattern 123
7.3 Singletonpattern 129
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7.4 Factorypatterns 131
7.5 Componentobjectmodel 133
7.6 Summary 134
Quiz 135
8 FlexibleDerivativesPricingTool 137
8.1 Designscope 137
8.2 Designgoalsandfeatures 138
8.2.1 Pricingtoolfeatures 138
8.2.2 Datatypessupport 140
8.3 Userinterface 141
8.3.1 Maincontrolinterface 143
8.3.2 Create/editproduct 145
8.3.3 Create/editmodel 146
8.3.4 Generatingafunctiontemplate 147
8.3.5 Complexparametervisualization 150
8.3.6 Pricinginterface 154
8.3.7 Visualizationinterface 156
8.3.8 Finitedifferenceengine 159
8.4 Summary 161
Quiz 163
9 PricingTooltoTradingPlatform 165
9.1 Pricingtool:internals 165
9.1.1 Commonquantclasses 167
9.1.2 Maininterfaces 170
9.1.3 Pluggablepricingmodels 176
9.1.4 Reusablecomponents 177
9.1.5 Sourcecodedocumentation 179
9.1.6 Externalpackages 179
9.2 Futureenhancements 180
9.2.1 Tradedatabase 180
9.2.2 Marketdata 181
9.2.3 Life-cyclemanagement 190
9.2.4 Securityandaccesscontrol 190
9.2.5 Batchprocess 191
9.3 Summary 191
Quiz 191
10 SummingUp 193
10.1 Epilogue 193
10.2 Furtherreading 195