INVESTMENT STRATEGIES: ADVANCED TOOLS TO CREATE YOUR MODELS

CODING YOUR WAY TO TAILORED INVESTMENT STRATEGIES

Interview with Valerio Pagano
CEO of Sparkling Rocks, a subsidiary of ATS-Base Digitale Group (Sesa S.p.A.) specializing in Quantitative Investing.

In the era of modern finance, characterized by increasing automation and a multiplication of data and information, the ability to process and analyze large amounts of data, and to make investment decisions based on this data quickly and efficiently, has become fundamental. Programming plays a central role in this scenario, offering financial operators the opportunity to consider it a true work tool for implementing automated decision-making models that can revolutionize their way of doing business. The Jagged Island platform enables this new approach to the finance business, based on programming and the automation of the application of decision-making models.

How have trading rooms evolved, and what challenges lie ahead?

Let’s start with one of the fundamental reasons that led us, as SparklingRocks, to develop our Jagged Island platform. Within a trading room, each trader seeks a way to automate as much as possible the phases of analysis and investment decisions: there is the trader who builds his small macros with Excel, creating a certain operational clumsiness, or who asks for support from his IT, an approach that requires long times and with results not always in line with the expectations of those who follow the business. Moreover, the discretionary approach to investment decisions, based exclusively on the trader’s subjectivity and experience, is giving way to an objective approach based on models and the analysis of financial data that are now growing exponentially. These trends have increasingly convinced us that there is a need for tools capable of processing large amounts of data and correlating countless variables, providing the trader with the result of automation and leaving them with the irreplaceable task of deciding, but with greater precision.

What are the advantages of using the Jagged Island platform and how does it facilitate model implementation?

Jagged Island has been designed to empower traders and asset allocators to develop their own strategies, safeguarding their competitive edge. The strategy represents the core of the trader’s and asset allocator’s knowledge and skill, and being able to develop it independently and with full control is certainly an added value. This is why we consider programming an active working tool and Jagged Island the enabling platform. Jagged Island allows for the development of more complex and accurate strategies, thanks to the easy integration of large amounts of diverse data (market, microeconomic, macroeconomic, unstructured – e.g., news, proprietary – e.g., metrics of one’s own operations) within a controlled environment that significantly reduces risks. In summary, the components of a decision-making and operational process are threefold:

• the Analysis Model, the model responsible for making financial decisions;
• he Constraint Manager, which ensures compliance with portfolio or instrument limits;
• the Execution Model, which implements the operational logic necessary to carry out decisions in the market.

These are business ideas and objectives translated into code (with the ability to use the most suitable and familiar programming language) to create an automated decision-making and operational process with fully overseen phases of research, development, and testing, thanks to the platform’s features.

But what do operators think about the ability to write a script? Do they need to become software programmers?

This barrier is naturally being overcome by various ongoing changes. Increasingly, new figures emerging from university courses in “quantitative finance” are present on the trading floors, equipped with strong skills in financial mathematics and programming. Additionally, technological evolution, particularly related to generative AI, can help even those who are not programming experts to transform trading or investment logic into code. Moreover, we at Sparkling Rocks are actively part of this change, offering a support pathway towards applied Intelligent Quantitative Investing. This aims to enhance the specialization of our clients’ personnel and make it a tangible lever for their business. One must not forget the role of the platform in providing a controlled and monitored operational environment. Returning to the topic of coding, the platform ensures quality: for instance, if a code is poorly written, it gets blocked. Jagged Island also includes integrated tools for model validation and backtesting, ensuring their robustness and reliability, and integrates with various data sources, eliminating the need for custom developments and facilitating access to necessary information. All of this allows financial operators to focus solely on defining and implementing strategies, thus on their core business.

In conclusion, what message would you like to leave for those interested in the advantages of adopting the quantitative investing approach?

The quantitative investing (QI) approach represents a significant change in the financial world, which can greatly enhance the competitive advantage of investment firms that adopt it. The ability to develop and independently implement automated decision-making models offers financial operators a significant strategic advantage: quicker access to updated models in line with business evolution, lower development costs, and greater customization, combined with the consolidation of using automated quantitative logic. All of this will bring new vitality to financial entities that have always operated in a complex and highly discontinuous environment.