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Activity Number: 186
Type: Topic Contributed
Date/Time: Monday, July 30, 2007 : 2:00 PM to 3:50 PM
Sponsor: Section on Risk Analysis
Abstract - #309827
Title: A Methodology for Trading and Investment System Development
Author(s): Benjamin Van Vliet*+ and Andrew Kumiega
Companies: Illinois Institute of Technology and Spectrum Global
Address: 1315 W Waveland, Chicago, IL, 60613,
Keywords: Operational Risk ; Financial markets ; Development Methodology
Abstract:

Basel II defines operational risk as the probability of loss due to a failure of internal processes or external events. Best practices in software development lower operational risk. This paper presents best practices in trading and investment system development. The methodology combines a traditional development methodologies in a single paradigm with four stages. The activities of the four stages are organized into a plan-benchmark-do-check framework revolving around quantitative methods, data and testing, technology, and ongoing management respectively. The methodology incorporates gates from new product development, which are meetings where management makes go/kill decisions, weeding out weak projects and reallocating scarce resources towards more promising projects. We believe this methodology can be applied to software development-related problems in other industries.

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Revised September, 2007