Correctness of Backtest Engines
Abstract
In recent years several trading platforms appeared which provide a backtest engine to calculate historic performance of self designed trading strategies on underlying candle data. The construction of a correct working backtest engine is, however, a subtle task as shown by Maier-Paape and Platen (cf. arXiv:1412.5558 [q-fin.TR]). Several platforms are struggling on the correctness. In this work, we discuss the problem how the correctness of backtest engines can be verified. We provide models for candles and for intra-period prices which will be applied to conduct a proof of correctness for a given backtest engine if the here provided tests on specific model candles are successful. Furthermore, we hint to algorithmic considerations in order to allow for a fast implementation of these tests necessary for the proof of correctness.
Cite
@article{arxiv.1509.08248,
title = {Correctness of Backtest Engines},
author = {Robert Löw and Stanislaus Maier-Paape and Andreas Platen},
journal= {arXiv preprint arXiv:1509.08248},
year = {2015}
}
Comments
15 pages, 6 figures; Keywords: backtest evaluation, historical simulation, trading system, candle chart, imperfect data, price model, correctness test, backtest correctness