Development Platforms for Financial modeling (What do the Quants use?)

Question

Quantitative Analysts or "Quants" predict the behavior of markets to maximize profits. I am interested in the software that they use to accomplish this. Are there development platforms, libraries, languages or Data Mining suites specifically tailored to Financial Modeling?

Answer 1

Statistical Modeling:

First, there are statistical computing languages like R which is powerful and open-source, with lots of packages for analysis and plotting.

You will find some R packages that relate to finance:

• http://www.quantmod.com/
• https://www.rmetrics.org/
• https://www.rmetrics.org/ebooks-tseries

Machine Learning and AI to train the system on past data:

• Weka Data Minig: http://www.cs.waikato.ac.nz/ml/weka/

• libsvm (data classifiers http://www.csie.ntu.edu.tw/~cjlin/libsvm/)

• "Artificial Intelligence: Modern Approach" book (code: http://aima.cs.berkeley.edu/code.html)

Backtesting the trading system on past data:

More often that not, broker trading platforms will provide facilities for trading automation, in form of scripts and languages with which you can program the logic of the trading "strategy" (some use common languages like Java, some use proprietary ones). They will also provide some minimal support to test the strategy on past data, and get a detailed report on the taken trades and their outcome.

Connection to broker and System Testing:

Either you use some broker-proprietrary trading API, or go with the more standardized FIX. Building a FIX server that does a quotation ticks playback to your trading system (which in this case will be a FIX client) is also a very good form of validation of the system. Most reputable ECNs will provide FIX access. So this is more portable than any other interface.

QuickFIX/J is a full featured messaging engine for the FIX protocol. It is a 100% Java open source implementation of the popular C++ QuickFIX engine.

• http://www.quickfixj.org/

Answer 2

There aren't any full blown platforms/applications per-se, since pretty much all software in this field is developed in-house, and usually behind the firewall (obviously for competitive advantage; in a fiercely competitive industry)

A well known library that includes a lot of algorithms and pricing models, and makes for a suitable starting point for a framework or app is called quantlib.

Answer 3

The Strata project from OpenGamma provides a comprehensive open source Java library for market risk, including all the basic elements a quant would need to manage things like holidays, trades, valuation and risk measures. Disclaimer, I am an author.