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Role of Quantitative Developers in Trading

Quantitative developers are specialists who implement and maintain quantitative models, bridging the gap between software engineering and quantitative analysis. The document discusses the hypothesis of non-ergodicity in financial markets, emphasizing that future returns depend on an algorithm's predictive ability in non-stationary systems. It highlights the importance of analyzing trade sequences to evaluate the effectiveness of trading strategies.

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42 views1 page

Role of Quantitative Developers in Trading

Quantitative developers are specialists who implement and maintain quantitative models, bridging the gap between software engineering and quantitative analysis. The document discusses the hypothesis of non-ergodicity in financial markets, emphasizing that future returns depend on an algorithm's predictive ability in non-stationary systems. It highlights the importance of analyzing trade sequences to evaluate the effectiveness of trading strategies.

Uploaded by

derkuzesta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Quantitative developer

[edit]

Quantitative developers, sometimes called quantitative software engineers, or quantitative


engineers, are computer specialists that assist, implement and maintain the quantitative
models. They tend to be highly specialised language technicians that bridge the gap between
software engineers and quantitative analysts. The term is also sometimes used outside the
finance industry to refer to those working at the intersection of software engineering and
quantitative research.

Hypothesis of non-ergodicity of financial markets

[edit]

The nonergodicity of financial markets and the time dependence of returns are central issues
in modern approaches to quantitative trading. Financial markets are complex systems in
which traditional assumptions, such as independence and normal distribution of returns, are
frequently challenged by empirical evidence.[16][17] Thus, under the non-ergodicity
hypothesis, the future returns about an investment strategy, which operates on a non-
stationary system, depend on the ability of the algorithm itself to predict the future
evolutions to which the system is subject. As discussed by Ole Peters in 2011, ergodicity is a
crucial element in understanding economic dynamics,[18] especially in non-stationary
contexts. Identifying and developing methodologies to estimate this ability represents one of
the main challenges of modern quantitative trading.[19][20] In this perspective, it becomes
fundamental to shift the focus from the result of individual financial operations to the
individual evolutions of the system.

Operationally, this implies that clusters of trades oriented in the same direction offer little
value in evaluating the strategy. On the contrary, sequences of trades with alternating buy
and sell are much more significant. Since they indicate that the strategy is actually predicting
a statistically significant number of evolutions of the system.

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