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arxiv: 1509.08248 · v1 · pith:P2CVVMEGnew · submitted 2015-09-28 · 💱 q-fin.TR · q-fin.CP

Correctness of Backtest Engines

classification 💱 q-fin.TR q-fin.CP
keywords backtestcorrectnessenginecandlesenginesplatformsproofseveral
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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.

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