On-demand Scans, ArbMakerFX and beyond

In the next few months we’re expanding our software suite to include three install products and an online “On-demand Scan” service. This latter service is already in place here and offers scans customized to precise user requirements.

In early September we expect to launch ArbMakerFX which will cater exclusively to FX traders. At the same time an enhanced version of the current software will be released the details of which we will blog about nearer the date. Work also continues on a top-end version for which we will bring news on release timing and features as soon as possible.

However, we can provide now a preview of some of the additional features being introduced across the new suite of ArbMaker software before year-end:

Time-varying betas (some versions)

A fixed beta calculation captures the risk/return relationship between a pair of symbols over a given time range. Where the beta relationship is stable this works well.

For volatile relationships more accurate modeling needs to allow betas to evolve in response to changes to the fundamental underlying relationship between each half of a pair whilst also filtering out noise. We have two methods to capture such variations in beta relationships: the first of these is Robert Goodell Brown’s double exponential smoothing prediction (DESP) model; and the second is derived from Rudolf E. Kálmán’s “Kalman Filter”.

Implied profitability measure

Uncovering potential arbitrage opportunities does not automatically uncover the most profitable of the these. We introduce a proprietary measure to enable filtering by implied pair profitability per trade.

Natural logs or raw prices (some versions)

Choose between natural logs or raw price data for the cointegration algorithm. Natural logs are used by convention but the turning points of both are the same. However, it can be useful to compare the two: cointegration in one but not the other may suggest the relationship is weak.

Rolling Z (some versions)

This uses observation-by-observation calculations to present the Z-score used in spread calculations on an accumulated – rather than overall – basis. The effect brings greater accuracy to back testing and signal generation.

Broker bridges (some versions or an option)

To be included or available as options. Development of bridges to Interactive Brokers TWS and MetaTrader 4 has required a lot more time than forecast originally. These delays caused us to request a deferral of our review by Automated Trader magazine from Q4, 2012 to Q1, 2013. The tentative expectation for full release is October.