IB Olympiad System Outline: v.2

March 1, 2009
191 Views

I previously posted a system outline and before that a trading plan for Interactive Brokers’ Collegiate Olympiad. The criticism I received via comments and email was very helpful. The following is the updated plan, now that I have basically finished the system’s components. The final version is due Dec. 31st (in 3 days). I will post a schematic of the system as soon as I have time to make a graphic and accompany that post with code.

Max Dama
University of California Berkeley Haas School of Business
United States of America

Matlab with ActiveX API

Strategy I: Localized Regression, Global Macro Factor Model
Trade a long/short portfolio of the futures listed below. Entry points are determined once per week by a localized regression model based on a support vector machine with a gaussian (RBF) kernel. The three contracts forecasted to outperform (underperform) the most are entered long (short). Each position is exited at the end of the week or by hitting the stop. To control risk, positions are sized to set total weekly value-at-risk (standard deviation of returns) to approximately 12%, therefore each position contributes approximately 2%, with rounding error due to indivisibility of contr


I previously posted a system outline and before that a trading plan for Interactive Brokers’ Collegiate Olympiad. The criticism I received via comments and email was very helpful. The following is the updated plan, now that I have basically finished the system’s components. The final version is due Dec. 31st (in 3 days). I will post a schematic of the system as soon as I have time to make a graphic and accompany that post with code.

Max Dama
University of California Berkeley Haas School of Business
United States of America

Matlab with ActiveX API

Strategy I: Localized Regression, Global Macro Factor Model
Trade a long/short portfolio of the futures listed below. Entry points are determined once per week by a localized regression model based on a support vector machine with a gaussian (RBF) kernel. The three contracts forecasted to outperform (underperform) the most are entered long (short). Each position is exited at the end of the week or by hitting the stop. To control risk, positions are sized to set total weekly value-at-risk (standard deviation of returns) to approximately 12%, therefore each position contributes approximately 2%, with rounding error due to indivisibility of contracts. The stop is set 1-SD, 2.5% by construction, below (above) the entry price for long (short) positions. Normal entry and exit will use market orders.
This strategy makes money by exploiting information in price movements among many different contracts, which can be interpreted as macroeconomic factors. It exploits the inefficiency of human traders to correlate the data from >10 diverse streams. The strategy has the advantage of being adaptive due to weekly retraining on fresh data.

Exchange: CBOE
Contracts:
VXD CBOE DJIA VOLATILITY INDEX DV
VXN CBOE NDX VOLATILITY INDEX VN
VT CBOE S&P 500 THREE MONTH VARIANCE VT
IIK CBOE S&P 500 TWELVE MONTH VARIANCE VA
VIX CBOE VOLATILITY INDEX VX
RVX RUSSELL 2000 VOLATILITY INDEX VR

Exchange: CBOT
Contracts:
SR 10 YEAR SWAP FUTURES SR
ZN 10 YEAR US TREASURY NOTE ZN
ZT 2 YEAR US TREASURY NOTE ZT
ZQ 30 DAY FED FUNDS ZQ
ZB 30 YEAR US TREASURY BOND ZB
SA 5 YEAR SWAP FUTURE SA
ZF 5 YEAR US TREASURY NOTE ZF
DD BIG SIZED DOW JONES INDUSTRIAL AVERAGE $25 DD
ZI CBOT 5000 OZ SILVER FUTURES ZI
ZC CORN FUTURES ZC
AIGCI DOW JONES AIG COMMODITY INDEX AW
INDU DOW JONES INDUSTRIAL AVERAGE ZD
ZG GOLD 100 TROY OZ ZG
YC MINI SIZED CORN FUTURES XC
YM MINI SIZED DOW JONES INDUSTRIAL AVERAGE $5 YM
YE MINI SIZED EURODOLLAR FUTURES YE
YG MINI SIZED NY GOLD FUTURES YG
YI MINI SIZED NY SILVER FUTURES YI
YK MINI SIZED SOYBEAN FUTURES XK
YW MINI SIZED WHEAT FUTURES XW
ZO OAT FUTURES ZO
ZR ROUGH RICE FUTURES ZR
ZS SOYBEAN FUTURES ZS
ZM SOYBEAN MEAL FUTURES ZM
ZL SOYBEAN OIL FUTURES ZL
ZW WHEAT FUTURES ZW

Exchange: CME
Contracts:
EM 1 MONTH LIBOR (INT. RATE) GLB USD
S0 10 YEAR SWAP CME S0 USD
GTB 13 WEEK T-BILLS GTB USD
S2 2 YEAR SWAP CME S2 USD
S5 5 YEAR SWAP CME S5 USD
AUD AUSTRALIAN DOLLAR 6A USD
ACD AUSTRALIAN DOLLAR ACD CAD
AJY AUSTRALIAN DOLLAR AJY JPY
BOS BOSTON HOUSING INDEX BOS USD
BRE BRAZILIAN REAL (CURR) 6L USD
GBP BRITISH POUND 6B USD
PJY BRITISH POUND PJY JPY
PSF BRITISH POUND PSF CHF
CAD CANADIAN DOLLAR 6C USD
CJY CANADIAN DOLLAR CJY JPY
CHI CHICAGO HOUSING INDEX CHI USD
RME CME CHINESE RENMINBI / EURO CROSS RATE RME EUR
RMY CME CHINESE RENMINBI / JAPANESE YEN CROSS RATE RMY JPY
RMB CME CHINESE RENMINBI / US DOLLAR CROSS RATE RMB USD
USS CME DOLLAR INDEX USD USD
BQX CME E-MINI NASDAQ BIOTECHNOLOGY BIO USD
FTX CME FTSE XINHUA CHINA 25 FXN USD
GSCI CME GSCI INDEX GD USD
CZK CZECH KORUNA CZK USD
ECK CZECH KORUNA ECK EUR
DEN DENVER HOUSING INDEX DEN USD
NKD DOLLAR DENOMINATED NIKKEI 225 INDEX NKD USD
EED E-MINI EURO-DOLLAR EED USD
EMXCME E-MINI MSCI EMERGING MARKETS FUTURES EMI USD
NQ E-MINI NASDAQ 100 FUTURES NQ USD
QCN E-MINI NASDAQ COMPOSITE QCN USD
ES E-MINI S&P 500 ES USD
EMD E-MINI S&P MIDCAP 400 FUTURES EMD USD
SMC E-MINI S&P SMALLCAP 600 FUTURES SMC USD
EUR EUROPEAN MONETARY UNION EURO 6E USD
E7 EUROPEAN MONETARY UNION EURO E7 USD
EAD EUROPEAN MONETARY UNION EURO EAD AUD
ECD EUROPEAN MONETARY UNION EURO ECD CAD
RF EUROPEAN MONETARY UNION EURO RF CHF
RP EUROPEAN MONETARY UNION EURO RP GBP
RY EUROPEAN MONETARY UNION EURO RY JPY
GF FEEDER CATTLE GF USD
PB FROZEN PORK BELLY GPB USD
GE GLOBEX EURO-DOLLAR GE USD
CUS HOUSING INDEX COMPOSITE CUS USD
EHF HUNGARIAN FORINT EHF EUR
HUF HUNGARIAN FORINT HUF USD
IWM ISHARES RUSSELL 2000 INDEX FUND IWM USD
ILS ISRAELI SHEKEL ILS USD
JPY JAPANESE YEN 6J USD
J7 JAPANESE YEN J7 USD
KRW KOREAN WON KRW USD
LAV LAS VEGAS HOUSING INDEX LAV USD
HE LEAN HOGS HE USD
LE LIVE CATTLE LE USD
LAX LOS ANGELES HOUSING INDEX LAX USD
MXP MEXICAN PESO 6M USD
MIA MIAMI HOUSING INDEX MIA USD
MXEA MSCI EAFE INDEX EFE USD
NDX NASDAQ 100 STOCK INDEX ND USD
NYM NEW YORK HOUSING INDEX NYM USD
NZD NEW ZEALAND DOLLAR 6N USD
NOK NORWEGIAN KRONE NOK USD
EPZ POLISH ZLOTY EPZ EUR
PLN POLISH ZLOTY PLN USD
QQQQ POWERSHARES QQQ QQQ USD
RUR RUSSIAN RUBLE 6R USD
SGX S&P 500 / CITIGROUP GROWTH INDEX SG USD
SVX S&P 500 / CITIGROUP VALUE INDEX SU USD
FIN S&P 500 FINANCIAL SECTOR INDEX FIN USD
SPX S&P 500 STOCK INDEX SP USD
MID S&P MIDCAP 400 STOCK INDEX MD USD
SML S&P SMALLCAP 600 FUTURES SMP USD
TEC S&P TELECOM/ IT INDEX TEC USD
SDG SAN DIEGO HOUSING INDEX SDG USD
SFR SAN FRANCISCO HOUSING INDEX SFR USD
ZAR SOUTH AFRICAN RAND 6Z USD
SPY SPDR TRUST SERIES 1 SPY USD
SEK SWEDISH KRONA SEK USD
CHF SWISS FRANC 6S USD
SJY SWISS FRANC SJY JPY
WDC WASHINGTON DC HOUSING INDEX WDC USD
NIY YEN DENOMINATED NIKKEI 225 INDEX NIY JPY

Exchange: New York Board of Trade
Contracts:
CC COCOA NYBOT CC USD
KC COFFEE “C” KC USD
CT COTTON NO. 2 CT USD
OJ FC ORANGE JUICE “A” OJ USD
DX NYBOT US DOLLAR FX DX USD
CR REUTERS JEFFERIES CRB INDEX CR USD
RYO RUSSELL 1000 INDEX R USD
RYO RUSSELL 1000 INDEX RF USD
TO RUSSELL 2000 FUTURES TO USD
TF RUSSELL 2000 MINI FUTURES TF USD
SB SUGAR NO. 11 SB USD
SE SUGAR NO. 14 SE USD

Exchange: New York Merchantile Exchange
Contracts:
CC COCOA NYBOT CJ USD
KC COFFEE “C” KT USD
QC COMEX MINY COPPER QC USD
QO COMEX MINY GOLD QO USD
QI COMEX MINY SILVER QI USD
CT COTTON NO. 2 TT USD
GC GOLD GC USD
HO HEATING OIL HO USD
NG HENRY HUB NATURAL GAS NG USD
CL LIGHT SWEET CRUDE OIL CL USD
AL NYMEX ALUMINUM INDEX AL USD
BB NYMEX BRENT FINANCIAL FUTURES INDEX BB USD
HG NYMEX COPPER INDEX HG USD
QU NYMEX MINY GASOLINE RBOB INDEX QU USD
QH NYMEX MINY HEATING OIL INDEX QH USD
QM NYMEX MINY LIGHT SWEET CRUDE OIL INDEX QM USD
QG NYMEX MINY NATURAL GAS INDEX QG USD
PA NYMEX PALLADIUM INDEX PA USD
PL NYMEX PLATINUM INDEX PL USD
PN NYMEX PROPANE INDEX PN USD
RB NYMEX RBOB GAS INDEX RB USD
SI NYMEX SILVER INDEX SI USD
UX NYMEX URANIUM INDEX UX USD
SB SUGAR NO. 11 YO USD

Please criticize as much as you feel qualified to.