Model Production

Joaquin Narro and Monica Caamano

Once a model has been developed, it needs to go into production. However, before going into production, there needs to be a step in-between where the model can be assessed under live market conditions for a period, in a size that is big enough to be realistic but small enough not to have a significant impact on performance. This is why we first introduce the model into a testing environment, where the model can be assessed before rolling it out to the production phase once we are satisfied that the model meets the hurdles of the test environment.

Similarly, rules must also be in place to take a model out of the production environment and back into the test environment if necessary (and ultimately out to rest altogether if required). Finally, this chapter will also introduce a few technological concepts in relation to model production and development.

THE TESTING ENVIRONMENT

A testing environment is a live trading environment where a new strategy is first implemented. The purpose of this environment is to gain experience and accumulate a live trading record. Effectively, the testing environment offers the opportunity to validate the assumptions made during the model