Friday, August 23, 2013

Backtest (empirical analysis) purposes

Coming from a institutional proprietary trading standpoint, here I attempt to clarify purposes of backtests.

Main Purposes

Software debugging

This is about 95% of why we need backtests, to make sure that the developed trading platform does what it's supposed to do, e.g. enforcing limits, applying logic correctly.

Implementation Shortfall analyasis

Estimating performance decay with respect to latency, competition, etc.

What backtesting is NOT for


0 Reflections: