The process of evaluating a strategy, theory, or model by applying it to historical data.

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3
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2answers
491 views

Volatility of a rolling window strategy

What methods can be applied to determine the volatility of strategy using a rolling window? Using normal standard deviation would bias the results as the returns will be highly correlated. Although, ...
3
votes
1answer
58 views

How to compute daily compounded backtest returns closer to real-world results?

I often run quick tests of trading strategies in my analytics suites by: multiplying a vector of signal (lagged, {-1,0,1}) with a time series of daily percentage returns doing a cumulative product ...
0
votes
1answer
44 views

Calculation of Returns and Risk Metrics for L/S Portfolio

I am trying to build a test for a long/short portfolio. I am aiming for market neutral and have put together a long portfolio as well as a short portfolio (see below). However, I am not sure if I am ...
5
votes
0answers
1k views

VaR model Unconditional Coverage Tests: Is this extension of Kupiec POF test correct?

Background: Kupiec P. in 1995, published paper "Techniques for Verifying the Accuracy of Risk Management Models" on Journal of Derivatives, v3, P73-84, it's a Unconditional Coverage Tests designe for ...
3
votes
0answers
118 views

What is the most convenient data structure for backtesting a model of futures options prices?

I have an empirical model for the dynamics of futures prices in a particular market that I have implemented using a long series of the front five contracts. (I account for the roll in my model.) I ...
3
votes
0answers
444 views

Testing Valuation, Size and Momentum (proprietary factors) from 1988-2013: No evidence of driving cross-sectional returns

I am currently testing whether three proprietary factors - Valuation, Size and Momentum - explain cross-sectional returns. A sample of 3000 securities was tested using Fama-MacBeth two-pass ...
3
votes
0answers
242 views

Quant/Stat Factor Performance Website/Distribution?

Does anyone know of a decent quant/stat factor website, distribution(public or private) or publication that tracks performance of "many" of traditional quant/stat factors? By that I mean would show ...
3
votes
0answers
118 views

Are there canonical test cases for testing of pricing engines

Short intro: We are developing pricing engines for the calculation of market risk in a Solvency II solution, including bonds, callable bonds, cds, options, futures and so on. Are there any canonical ...
1
vote
0answers
30 views

How to compare market values with model values after calibration?

After calibration the G2++ model for interest (with swaption volatilities), I want to statistically test the quality of the calibration by comparing market to model values. What is the best way to ...
1
vote
0answers
48 views

Adjusting for your own orders in future backtests

I was asked this question in an interview and despite thinking about it for a while, I haven't been able to come up with a good answer. Suppose you have a strategy you are running where at certain ...
1
vote
0answers
178 views

How to fully replicate ADX + DI Indicators in Excel?

For black box testing, I was hoping that I could replicate the ADX + DI+ and DI- indicators that are provided in trading platforms such as ThinkOrSwim, ScottradeElite etc. However, I noticed that ...
1
vote
0answers
222 views

Comparing Backtests of Value-at-Risk and Expected Shortfall

My goal is to test if ES (CVaR) empirically is a better risk measure than VaR for a set of given variables (assumed underlying distribution, confidence level, sample size) for different asset classes. ...
1
vote
0answers
169 views

Backtesting benchmark / control test design

I am designing a backtesting system to test an algorithm. I'd like to have a benchmark / control test results to compare to the results of a custom algorithm. A limited "set" of stocks is selected ...
1
vote
0answers
294 views

VaR backtesting with overlapping time intervals

Of course the issue here is dependence: can it be removed or accounted for (in independence tests too, which of course would be troublesome)? There's a lot of literature on regression in this setting, ...
0
votes
0answers
27 views

Are there any software libraries for backtesting FX algorithms against tick data?

I've read question, however it doesn't appear as if any of those libraries work for FX data. A Google search for python forex backtesting turns up this project, ...
0
votes
0answers
95 views

How to calculate returns of backtested strategy?

Lets say I have some strategy (long/short) backtested for certain period. Strategy has entries/exits only at the end of the day and may have overnight positions hold. Now I would like to compare ...