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Capability tests
Ongoing tests to widen the model strength / weakness profile -
Diversification Benefit
Measure to evaluate the quality of portfolio construction as difference of average models MDD and portfolio MDD -
Risk-adjusted performance
Measure which combines model performance and model risk into a single number (GpA - α * MDD) with α > 0 -
GpA
Gain per Annum: average model performance per year calculated from model performance -
((GpA))
Vector of GpA values that are calculated for each rolling annual performance period (shifted by 1 day) -
Open position
Managing an open position: Point of origin for the construction of a technical trading strategy -
Market risk
Risk numbers for a market calculated via the buy and hold strategy -
Model quality control
Process which controls model performance after its release related to current market behavior and past model performance -
Model robustness
Model quality: robust models are acceptable in different markets -
Model stability
Model quality: similar inputs generate similar outputs -
Model volatility
Measure to quantify the strength of market price fluctuations -
Diversification
Important aspect of pairs of models when constructing a portfolio -
Strength/weakness profile
Model profile derived from the database of all model tests a model had to pass through before being released -
Model optimization
Part of model construction: analysis and determination of parameters to enable model application to a Financial Market -
Maximum drawdown / MDD
Measure to quantify the risk of a model / portfolio as the maximal distance of the model/portfolio performance to its High Watermark -
Model risk
Often reduced to MDD; generally MDD, model volatility, and yearly model return fluctuations -
Model High Watermark
Minimal non descending performance line above model performance -
Benchmark
Measure to evaluate an investment: performance of the underlying market or a model High Watermark -
Model acceptability
Model quality in relation to model performance and risk -
Market volatility
Measure to quantify the strength of market price fluctuations -
((MDD))
Vector of MDD values that are calculated for each rolling annual performance period (shifted by 1 day) -
Model validation
Process which determines the steps a model has to survive to be called reliable -
Trading strategy
A set of rules which determines the timing when to enter or exit a Long or Short position in a Financial Market -
Model performance
Complete history of realized and unrealized model returns, often reduced to daily values -
Vector distance measure
Measure to quantify the diversification of models via the distance of vectors like ((GpA)) or ((MDD)) -
Technical Analysis
Term used for a variety of algorithms and tools to analyze prices and volume of Financial Markets to forecast the direction of prices (standard definition)
