#Quant Invest Chicago: Andrew Kumiega from IIT on designing algorithms

Andrew Kumiega, an adjunct professor at IIT, gave this presentation today at Quant Invest Chicago. He notes that all ACF (Algorithmic Controlled Finance) trading systems require a high degree of spending on technology. The best way to measure success in ACF is the return minus expenses over the seed capital investment. The goal of HFT is to maximize the ROI of a portfolio of trading systems, subject to numerous constraints. Mechanical quality is the key to the process of maximizing ROI; this entails reducing defects, cycle times and is free.

The waterfall approach of building algorithmic trading systems is designing the strategy, backtesting and implementation. Systems profitability can be measured by CPL, which provides much different results than the corresponding Sharpe ratios.  Statistical process control uses the standard deviations of returns in backtesting to determine if the process is repeatable and if it is stable.  If the system stops working or variables are changed, the system should not be traded.  The system should then be redesigned and improved, following the same process as done when initially designing the system.

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