Gaining the Technology Edge

Wilmott Magazine, Sep 2013

Summary:

In the last decade technological advances have facilitated major innovations in the financial industry. Algorithms running on super-fast computers has enabled significant innovations and thus have revolutionized how algorithmic trading and high-frequency trading is done. Simulation and back testing in risk management are vastly scalable due to innovations in parallel and distributed computing. Quants have been in the forefront to leverage technology to enhance the performance of their models whether it is for speed, performance or scalability. Every aspiring and practicing quant needs to be aware how technology can enhance their model development and deployment efforts to maximize the performance of their models. In the last decade, I have worked with more than 25 customers helping them optimize their code to develop robust, high performance quantitative models. Technology can be a significant enabler and the benefits it can generate can be huge when optimally used. While optimizing code is important, code that is optimized to leverage the technology available reaps far more benefits. Time and again, I have realized that knowledge of the technologies and optimal deployment of technology within an organization helps to maximize the return on investment and to vastly improve performance in deployed models. Using the appropriate technology for the right use-case is important and many a times, quants need to redesign their prototype implementations to fully leverage the technology they intend to use. In this article, we discuss five technological innovations in the last two decades that have revolutionized quantitative model development and deployment. Knowledge of these technologies and optimal deployment can help quants develop efficient models and reap significant benefits and competitive advantage that was just not possible a decade ago.

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