Embracing Challenge with Proven Technology

In any advanced numerical or analytical science, the key to robustness rests with making the fewest possible assumptions. Trading Sciences’ technologies embrace the challenge of estimating fat-tail events using minimal assumptions and proven technology. Trading Sciences incorporates the world’s leading software for density and distribution analysis, PeakFit, into its core technology.

PeakFit, authored by one of Trading Sciences’ founders, contains over ninety different density models that are non-linearly fitted, usually in a multimodal framework. This experience was used to select specific upside and downside analytic models for automatically estimating an accurate density that was applicable to financial data sets, where a unimodal scatter was evident or where a unimodal smoothing still represented the fat tails. PeakFit has been used by thousands of scientific and engineering customers and is the top-selling peak modeling software in the world.

Non-Parametric, Multi-Modal Analysis

Trading Sciences utilizes a state-of-the-art kernel density procedure to visualize multimodal scatter. We developed sound mathematical foundations for accurately extracting probabilities from this non-parametric approach.

Minimal Historical Data Required

Trading Sciences estimates density widths and fat tails using refined methods that demonstrate considerable robustness even when using as few as twenty time periods (be it 20 ticks or 20 days) to define the historical universe. Market dynamics can change rapidly, and we’ve built our technologies around this requirement.

Expectation Modeling (EM): The Value of Defense

We are traders who have learned the value of defensive methods. Trading Sciences’ proprietary software innovation, Expectation Modeling (EM), answers the eternal question: when is it time to exit? EM analyzes prices, volatilities or trading returns and estimates whether the energy in a trend or sideways pattern is increasing or decreasing relative to a statistical confidence limit. EM automatically alerts the investor when the lower limit of EM is breached, suggesting there is only a small chance the market dynamics in place at the time a trade was entered is still valid. We consider EM an essential complement to our portfolio technologies. EM’s capabilities are versatile and can be used across a wide array of quantitative and derivative strategies.

For more information on EM, click here.

Continuous Intraday Analysis

Losses that occur intraday can stop managers out just as easily as end of day results. Trading Sciences has implemented a “touching” strategy for both VaR and derivatives measurements, since the intraday risk may be greater than closing prices when stops are implemented. This analysis measures the probability of whether an instrument or portfolio will touch an outlier prior to market close or option expiry.

In order to address whether the Trading Sciences technologies have value in your enterprise, it may be a simple matter of evaluating the assumptions currently in place.