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This might be a good place to start looking ...
http://pw1.netcom.com/~bschacht/
--- In amibroker@xxxxxxxxxxxxxxx, "quanttrader714"
<quanttrader714@xxxx> wrote:
> Speaking of Schachter, there's an interesting paper on capital
> allocation based on Value at Risk that he was project advisor to
> floating around in cyberspace somewhere.
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Gary A. Serkhoshian"
> <serkhoshian777@xxxx> wrote:
> >
> > Mark,
> >
> > Thanks for pointing me in the right direction re Kovner and
Caxton.
> It wasn't easy to find info on Caxton, but did find quite a few
> articles by Bary Schachter (Caxton Corp) on Stress Testing. His
> comment below really struck me, and is essentially what you and Fred
> have alluded to.
> >
> > http://www.erisk.com/LearningCenter/Jigsaw/market_schacter.asp
> >
> > Stress Testing
> > Barry Schachter of Caxton Corporation and Gloria Mundi
> >
> > Technology is making it easy to construct bad stress tests.
> Off-the-shelf risk management software comes with (relatively)
> easy-to-use graphical user interfaces for tweaking rates and prices.
> While it's a boon to have the ability to respond quickly when
> constructing stress scenarios in response to rapidly changing
> conditions, velocity is no substitute for perspicacity. Stress
testing
> demands a serious commitment of the right kind of resources, and
> because of this need we may see that firms begin to outsource stress
> test construction.
> >
> > For those not familiar, I found www.gloriamundi.org to be a good
> resource. www.erisk.com also carries a lot of Schachter's
> writings.
> I've attached one article I found helpful by Schachter entitled
> "Stress Testing for Fun and Profit".
> >
> > Mark, thanks for the patience, and I guess I'll go find my
> overalls
> and try again to get my arms around your criteria. The more I
learn,
> the more I realize there is still a lot I don't know.
> >
> > Kind Regards,
> >
> > Gary
> >
> >
> >
> > quanttrader714 <quanttrader714@xxxx> wrote:
> > For the robustness stuff I posted and many other methodologies,
I'd
> > agree. But with all due respect to Gary, what made me want to
> > respond was that if one didn't already know the info in Howard's
> post
> > and if one has little if any experience with MCS there are lots of
> > pitfalls, especially with trying to bridge the gap between
expected
> > and actual realtime results. And trying to do simulations without
> > being aware of them and ways to mitigate gives poor results and a
> bad
> > name to a perfectly valid and useful process.
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx> wrote:
> > > Mark,
> > >
> > > Personally I don't think it's overly complicated, but it clearly
> is
> > > time consuming regardless of whether one uses your methodology
or
> > > another. The question is, is it worth it ? I think the answer
> is
> > > self-evident.
> > >
> > > --- In amibroker@xxxxxxxxxxxxxxx, "quanttrader714"
> > > <quanttrader714@xxxx> wrote:
> > > > Not to be a naysayer, but... I agree with Howard in
principle,
> > > > however, the devil's in the details. My view: the OOS I'm
> > concerned
> > > > with are actual trades. I personally consider existing data
in
> > > sample
> > > > so applying what Howard suggested in this context is
> reconciling
> > > real
> > > > time results with expected results to see if the system is
still
> > > > performing acceptably. And that's more difficult in practice
> than
> > > > developing robustness criteria and finding robust systems.
IMO
> > the
> > > > results from criteria 3-5 are sufficient to use as expected
> > results
> > > if
> > > > done keeping the cautions I posted in 4 & 5 in mind and
applying
> > an
> > > > appropriate adjustment to the simulations as I also mentioned
> in
> > > that
> > > > post because, as Howard said, OOS results are almost always
less
> > > > profitable. Then there are several Statistical Process
Control
> > > (SPC)
> > > > techniques that, given criteria 3-5 results, will give you
> insight
> > > > into whether or not the system's out of control. Or, given *a
> > lot*
> > > of
> > > > experience, one could even eyeball it. But it certainly
ain't
> > > simple.
> > > >
> > > > Several have commented here and privately that all this seems
> > > awfully
> > > > complicated. So instead of another Edison quote, let me
suggest
> > > > looking at (find w/google) some of Caxton's research (Bruce
> > Kovner,
> > > > first Market Wizards book, started by borrowing $3,000 and now
> > #111
> > > on
> > > > Forbes 400 list of wealthiest Americans).
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx, "Gary A. Serkhoshian"
> > > > <serkhoshian777@xxxx> wrote:
> > > > > Thanks Howard. Makes sense, and seems simple to implement.
> > With
> > > > Tomasz adding MCS into AmiBroker, life will only get
sweeter : )
> > > > >
> > > > > Kind Regards,
> > > > > Gary
> > > > >
> > > > > Howard Bandy <howardbandy@xxxx> wrote:
> > > > >
> > > > > Hi Gary –
> > > > >
> > > > >
> > > > >
> > > > > I was thinking of looking at the recent trades in the out
of
> > > sample
> > > > period. We can get an idea of what the possible distribution
of
> > > > various metrics are by looking at the in sample results. But
> the
> > > out
> > > > of sample results are (almost) always less profitable, have a
> > lower
> > > > ratio of wins to losses, etc than the in sample results. One
> > > > technique I use is to run a quick and dirty monte carlo
program
> I
> > > > wrote in Basic that gives the likelihood of various metrics
> –
> > > > such as
> > > > the proportion of winning versus losing trades. If the out
of
> > > sample
> > > > results start falling in the area of the distribution that is
> > > > "unlikely", then I have a warning that the system may be
> > > > broken.
> > > > >
> > > > >
> > > > >
> > > > > Howard
> > > > >
> > > > >
> > > > >
> > > > > -----Original Message-----
> > > > > From: Gary A. Serkhoshian [mailto:serkhoshian777@x...]
> > > > > Sent: Sunday, November 09, 2003 11:33 AM
> > > > > To: amibroker@xxxxxxxxxxxxxxx
> > > > > Subject: RE: [amibroker] On Robustness, Post #1 : TO HOWARD
> > > > >
> > > > >
> > > > >
> > > > > Howard,
> > > > >
> > > > >
> > > > >
> > > > > Thanks for the detailed response. Helpful as always.
> > > > >
> > > > >
> > > > >
> > > > > Regarding your comment:
> > > > >
> > > > >
> > > > >
> > > > > Other techniques could be comparison of various metrics of
> > recent
> > > > trades with the probabilities that those results come from a
> > system
> > > > that is healthy or broken.
> > > > >
> > > > >
> > > > >
> > > > > Can we come to this conclusion by looking at frequency
> > > > distributions of the metrics in question during the IS period?
> > > > >
> > > > >
> > > > >
> > > > > Thanks again,
> > > > >
> > > > > Gary
> > > > >
> > > > >
> > > > >
> > > > >
> > > > >
> > > > > Howard Bandy <howardbandy@xxxx> wrote:
> > > > >
> > > > > Hi Gary –
> > > > >
> > > > >
> > > > >
> > > > > One -- Yes, the presidential election cycle has strong
> biases.
> > > > This year, year 3, is traditionally an up year. I mentioned
the
> > > > presidential cycle as an example to ward off the flames that
> > might
> > > > come from suggesting a crystal ball approach to model
> selection.
> > > > >
> > > > >
> > > > >
> > > > > Two -- I have done quite a bit of research into use of
> > analysis
> > > of
> > > > the equity curve as a feedback mechanism to help determine
the
> > > health
> > > > of a system. Other techniques could be comparison of various
> > > metrics
> > > > of recent trades with the probabilities that those results
come
> > > from a
> > > > system that is healthy or broken.
> > > > >
> > > > >
> > > > >
> > > > > Three -- As I have mentioned in posts to this board and to
> > > > HolyGrailSM, I believe several things are true of markets and
> > > systems.
> > > > Not everyone on this list agrees with me on these points, so
> > > > you'll
> > > > read some other opinions..
> > > > >
> > > > > Entries and exits need not be symmetric. In the equity
> > > markets,
> > > > drops are much steeper in slope than rises, so the parameters
> > used
> > > to
> > > > recognize them in the same number of bars are different.
> > > > > A good system need not trade all, or even a large
portion,
> of
> > > > tradables well.
> > > > > Markets change dramatically over time. It is very
> difficult
> > to
> > > > design a system that trades profitably over a long time
period,
> > > > particularly when the market characteristics change within
that
> > > > period.
> > > > > Systems that once worked well, then fail, will probably
> not
> > > work
> > > > well again.
> > > > >
> > > > >
> > > > >
> > > > > Howard
> > > > >
> > > > >
> > > > >
> > > > > -----Original Message-----
> > > > > From: Gary A. Serkhoshian [mailto:serkhoshian777@x...]
> > > > > Sent: Wednesday, November 05, 2003 9:15 PM
> > > > > To: amibroker@xxxxxxxxxxxxxxx
> > > > > Subject: RE: [amibroker] On Robustness, Post #1 : TO HOWARD
> > > > >
> > > > >
> > > > >
> > > > > Howard,
> > > > >
> > > > >
> > > > >
> > > > > A few questions regarding your post to Dave
> > > > >
> > > > >
> > > > >
> > > > > < One – we design two systems, one for bullish periods,
> the
> > > > other
> > > > for bearish periods. Then we look into our crystal ball and
use
> > the
> > > > system with the upward bias if we have some idea that the
near
> > > future
> > > > will be bullish, and use the system with the downward bias if
> we
> > > have
> > > > some idea that the near future will be bearish. This is not
> > wholly
> > > a
> > > > dream. For example, there are strong seasonalities in the US
> four
> > > > year presidential cycle. >
> > > > >
> > > > >
> > > > >
> > > > > Regarding the 4-year cycle, are you specifically referring
to
> > > year 3
> > > > (the year that is coming to an end) ? I've read year 3 since
> > WWII
> > > has
> > > > been profitable to the tune of 15% on avg. Any other cycles
> you'd
> > > > suggest to follow?
> > > > >
> > > > >
> > > > >
> > > > > < Two – we design two systems, one for bullish periods,
> the
> > > > other
> > > > for bearish periods, and include failsafe mechanisms in both.
> > Then
> > > we
> > > > trade both systems and let the system that works make money
> while
> > > the
> > > > system that doesn't work recognizes that it doesn't work and
> > > > stays flat. >
> > > > >
> > > > >
> > > > >
> > > > > Which failsafe mechanisms do you prefer? I've been looking
at
> > a
> > > DD
> > > > "floor" or perhaps a factor of MaxDD to turn off the system.
I
> > > > believe Dimitris has suggested a downslope in the 100MA of
> equity
> > > > curve which makes sense, too.
> > > > >
> > > > >
> > > > >
> > > > > < Three – we design a system that is profitable in both
> > bull and
> > > > bear periods. I think this is the hardest to do, since the
> > markets
> > > > act so differently that it requires additional parameters to
be
> > able
> > > > to recognize the additional patterns. In my experience,
systems
> > > > designed to do well in both bullish and bearish periods do not
> do
> > > > exceptionally well in either period >
> > > > >
> > > > >
> > > > >
> > > > > What you're describing is essentially that buys and shorts
can
> > not
> > > > be symmetrical. Is that right? What are the primary things
> that
> > > > differentiate up moves from down moves that require the need
for
> > > > asymmetry of signals.
> > > > >
> > > > >
> > > > >
> > > > > Thanks for the post, as this subject is scratching where I
> itch
> > in
> > > > my eduction of system development and optmization.
> > > > >
> > > > >
> > > > >
> > > > > Kind Regards,
> > > > >
> > > > > Gary
> > > > >
> > > > >
> > > > >
> > > > > Howard Bandy <howardbandy@xxxx> wrote:
> > > > >
> > > > > Hi Dave –
> > > > >
> > > > >
> > > > >
> > > > > Good posting. I'd like to comment on your last paragraph.
> > > > >
> > > > >
> > > > >
> > > > > - if one system does better in bull years and another in
bear,
> > the
> > > > one that
> > > > > does better in reality will depend on the proportion of bull
> and
> > > > bear years
> > > > > that actually occur. when we weight bull, bear and sideways
> > > markets
> > > > equally,
> > > > > are we matching their proportions in real life? what time
> frame
> > > > would we
> > > > > want to base that judgment on?
> > > > >
> > > > > It seems there are three approaches to take.
> > > > >
> > > > >
> > > > >
> > > > > One – we design two systems, one for bullish periods, the
> > other
> > > > for
> > > > bearish periods. Then we look into our crystal ball and use
the
> > > > system with the upward bias if we have some idea that the
near
> > > future
> > > > will be bullish, and use the system with the downward bias if
> we
> > > have
> > > > some idea that the near future will be bearish. This is not
> > wholly
> > > a
> > > > dream. For example, there are strong seasonalities in the US
> four
> > > > year presidential cycle.
> > > > >
> > > > >
> > > > >
> > > > > Two – we design two systems, one for bullish periods, the
> > other
> > > > for
> > > > bearish periods, and include failsafe mechanisms in both.
Then
> we
> > > > trade both systems and let the system that works make money
> while
> > > the
> > > > system that doesn't work recognizes that it doesn't work and
> > > > stays flat.
> > > > >
> > > > >
> > > > >
> > > > > Three – we design a system that is profitable in both bull
> > and
> > > > bear
> > > > periods. I think this is the hardest to do, since the markets
> > act
> > > so
> > > > differently that it requires additional parameters to be able
to
> > > > recognize the additional patterns. In my experience, systems
> > > designed
> > > > to do well in both bullish and bearish periods do not do
> > > exceptionally
> > > > well in either period.
> > > > >
> > > > >
> > > > >
> > > > > Howard
> > > > >
> > > > >
> > > > >
> > > > > -----Original Message-----
> > > > > From: Dave Merrill [mailto:dmerrill@x...]
> > > > > Sent: Monday, November 03, 2003 7:06 AM
> > > > > To: amibroker@xxxxxxxxxxxxxxx
> > > > > Subject: RE: [amibroker] On Robustness, Post #1
> > > > >
> > > > >
> > > > >
> > > > > some robustness issues that have been rattling around in my
> head
> > > > over the
> > > > > weekend...
> > > > >
> > > > > <<<SNIP>>>
> > > > >
> > > > >
> > > > >
> > > > >
> > > > >
> > > > > Send BUG REPORTS to bugs@xxxx
> > > > > Send SUGGESTIONS to suggest@xxxx
> > > > > -----------------------------------------
> > > > > Post AmiQuote-related messages ONLY to: amiq
> > uote@xxxxxxxxxxxxxxx
> > > > > (Web page: http://groups.yahoo.com/group/amiquote/messages/)
> > > > > --------------------------------------------
> > > > > Check group FAQ at:
> > > > http://groups.yahoo.com/group/amibroker/files/groupfaq.html
> > > > >
> > > > > Your use of Yahoo! Groups is subject to the Yahoo! Terms of
> > > > Service.
> > > > >
> > > > >
> > > > >
> > > > >
> > > > >
> > > > >
> > > > > Howard Bandy <howardbandy@xxxx> wrote:
> > > > >
> > > > > Hi Dave –
> > > > >
> > > > >
> > > > >
> > > > > Good posting. I'd like to comment on your last paragraph.
> > > > >
> > > > >
> > > > >
> > > > > - if one system does better in bull years and another in
bear,
> > the
> > > > one that
> > > > > does better in reality will depend on the proportion of bull
> and
> > > > bear years
> > > > > that actually occur. when we weight bull, bear and sideways
> > > markets
> > > > equally,
> > > > > are we matching their proportions in real life? what time
> frame
> > > > would we
> > > > > want to base that judgment on?
> > > > >
> > > > > It seems there are three approaches to take.
> > > > >
> > > > >
> > > > >
> > > > > One – we design two systems, one for bullish periods, the
> > other
> > > > for
> > > > bearish periods. Then we look into our crystal ball and use
the
> > > > system with the upward bias if we have some idea that the
near
> > > future
> > > > will be bullish, and use the system with the downward bias if
> we
> > > have
> > > > some idea that the near future will be bearish. This is not
> > wholly
> > > a
> > > > dream. For example, there are strong seasonalities in the US
> four
> > > > year presidential cycle.
> > > > >
> > > > >
> > > > >
> > > > > Two – we design two systems, one for bullish periods, the
> > other
> > > > for
> > > > bearish periods, and include failsafe mechanisms in both.
Then
> we
> > > > trade both systems and let the system that works make money
> while
> > > the
> > > > system that doesn't work recognizes that it doesn't work and
> > > > stays flat.
> > > > >
> > > > >
> > > > >
> > > > > Three – we design a system that is profitable in both bull
> > and
> > > > bear
> > > > periods. I think this is the hardest to do, since the markets
> > act
> > > so
> > > > differently that it requires additional parameters to be able
to
> > > > recognize the additional patterns. In my experience, systems
> > > designed
> > > > to do well in both bullish and bearish periods do not do
> > > exceptionally
> > > > well in either period.
> > > > >
> > > > >
> > > > >
> > > > > Howard
> > > > >
> > > > >
> > > > >
> > > > > -----Original Message-----
> > > > > From: Dave Merrill [mailto:dmerrill@x...]
> > > > > Sent: Monday, November 03, 2003 7:06 AM
> > > > > To: amibroker@xxxxxxxxxxxxxxx
> > > > > Subject: RE: [amibroker] On Robustness, Post #1
> > > > >
> > > > >
> > > > >
> > > > > some robustness issues that have been rattling around in my
> head
> > > > over the
> > > > > weekend...
> > > > >
> > > > > <<<SNIP>>>
> > > > >
> > > > >
> > > > >
> > > > >
> > > > >
> > > > >
> > > > > Send BUG REPORTS to bugs@xxxx
> > > > > Send SUGGESTIONS to suggest@xxxx
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> > > > > Post AmiQuote-related messages ONLY to: amiq
> > uote@xxxxxxxxxxxxxxx
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> > > > > --------------------------------------------
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