Abstract
This chapter focuses on the utility of checking performance during the development of the trading system. This process includes not only determining whether or not the trading system makes money, but also checking the performance of design and development processes through quality assurance testing. This is the step where a team tests the validity of the proposed trading system in addition to another review of the correctness of the units. The goal of the iterative process is to deliver tested, working prototypes for use as oracles, gold standards, and run packs for regression testing of later implementations. Prototypes indicate the data to be collected and the teams collect that data and analyze it to validate the continued suitability and effectiveness of the trade selection algorithms, position management, and risk management logic compared against known results generated during backtesting. Proper testing ensures the correctness of new systems and increases the probability of success. Walkthroughs and inspections are used to detect a requirements defect at a specification time. Inspections as a kind of formal technical review have proven to be extremely effective in detecting defects throughout a project. During inspections, product team members can use checklists to systematically review trading/investment system design components, each person identifying defects in logic, data, mathematics, prototypes, or design. Logic inspection at the prototyping stage allows errors to be detected again when the cost of fixing them is small. The procedures for white, gray, and black box testing should be documented. Over the successive tests, product teams should generate individual run packs, computer folders with unique names for each run. The run pack should include a copy of the prototype software, data used to generate the run, and a run control document.
Published Version
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