A Traderís Guide to
Trading/Strategy P&L Simulation
to learn implementing and using forward and backward testing simulation to
assess the risk-adjusted returns of trading/strategies and the implications for holding
period returns for market makers, investors, and arbitrageurs including:
To provide a good understanding of basic and advanced market
To provide a good understanding of the construction and usage of forward
(Monte Carlo) and backward (historical) testing methods.
To provide a good understanding of "core" strategies and their variations,
and replicating strategies for directional, arbitrage, and position
keeping trading. This includes dynamic methods (sensitivity/V01
based), static methods (immunisation, profile matching), and PaR based
To examine several important cases for each type of position/trading
strategy, and illustrate the usage, and insight of holding P&L
market maker, prop traders,
sales, support, structurers
1) Valuation and Market Dynamics: introduction to
the tools and concepts of product valuation under uncertainty.
Clear and working illustration of both the basic underlying models and
assumptions, the techniques used for valuation/risk management, as well as
implications for real-world application.
2) Simulation Methods: detailed coverage of
important forward testing (Monte Carlo forecasting) and backward testing
(historical data "forecasting"), providing sufficient knowledge not only to
build simulators that process entire trading strategies with rebalance and
real world effects (transaction costs, liquidity, credit, etc.), but also to
know how to use them "sensibly" in a real world setting.
3) Position Keeping
: Detailed coverage of key trading
strategies for directional, arbitrage, and position keeping/hedging based
strategies. Techniques include static sensitivity based analysis/methods
(e.g. V01/Duration), dynamic sensitivity (Delta, Gamma, Vega, etc), immunisation
of cash flows, profile matching for complex pay-outs/exotic options using both
static and dynamic variations,
4) Analyses of position holding strategies:
position rebalancing, holding period rebalancing forward/backward
testing for important cases, including:
futures: Buy & Hold, Moving Average Cross
with Bond (or equivalently, a direction spread trade)
w future (or equivalently a directional "basis" spread trade)
hedging (or equivalently a directional swap spread trade)
equity option: naked, Delta, and Delta+Gamma Pyramid
FX and IR
digital option using static and dynamic profile matching
in-house versions of this
seminar can be easily extended to include the simulations and analyses of
classes of interest to your portfolios, clients, etc.
comprehensive and extensively illustrated Handout Notes (see samples
Much software and supporting materials
Plus copies of relevant TG2 Books/e-Books
Seminars can be tailored to your trading, risk, client, and systems needs.
Submit your needs, and/or "cut/paste" from other Seminars (see entire "standard"