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Manufactured in Team-LRN CONTENTS Acknowledgments v SECTION ONE Trading System Development 1 1 Introduction 3 2 Development Methodology 11 SECTION TWO Introduction to VB.NET: Algorithm Development 31 3 Getting Started with VB.NET 33 4 Value Types and Operators 47 5 Control Structures 65 6 Procedures 81 7 Objects 109 8 Arrays 133 9 Problem Solving 151 10 .NET Type System 171 SECTION THREE Database Programming: Back Testing 185 11 Relational Databases 187 12 ADO.NET 201 13 Structured Query Language 219 14 Introduction to Data Structures 243 15 Advanced Data Structures 257 iii For more information about this title, click here. Team-LRN SECTION FOUR Advanced VB.NET: Implementation 269 16 Software Connectivity and Interoperability 271 17 Connecting to Trading Software 281 18 XML 301 19 XML Protocols in Financial Markets 323 SECTION FIVE Object-Oriented Programming: Risk Management 341 20 Unified Modeling Lanaguage 343 References 379 Acronyms 383 Index 385 iv Contents Team-LRN ACKNOWLEDGMENTS Andrew Kumiega, Nithiphong Vikitset, Anton Karadakov, David Norman, Keith Black, Pamela Reardon, Alex Deitz, Melanie Winter, Siripor n Treetanasaw at, Mulianto The, D ebbie Cernauskas , Michael Modica, Jerold Lavin, Duana Wooters, Thomas E. “Burma” Shea, Sagy Mintz, Kenneth M. Horjus, Mark McCracken, Julia Spaulding, Dave Kuipers, Rich Pombonyo, Paresh Akbari, Cliff Ensing, Brain Huyser, Mark Groenenboom, Bruce Rawlings, Gary Lahey, Hank Perrit, Jack Wing, Varsha Pitre, Michael Ubis, Jason Malkin, and Irma Baines. v Copyright © 2004 by The McGraw-Hill Companies, Inc . C lick here for terms of use. Team-LRN This page intentionally left blank. Team-LRN SECTION ONE Trading System Development I project that, [in the next ten years], the majority of mo ney managers will completely automate their trade entry decisions So, in the very near future, if you have a mouse in your hand, you will be too late. Blair Hull Copyright © 2004 by The McGraw-Hill Companies, Inc . C lick here for terms of use. Team-LRN This page intentionally left blank. Team-LRN [...]... the Kumiega–Van Vliet paradigm So this book is not just about Visual Basic. NET (VB.NET) and databases It is about modeling financial instruments in code and putting the pieces, or models, together to create an automated trading or risk management system using a programming language, which in this case is VB.NET Let’s get started Financial markets are in a constant state of evolution, from buttonwood... the financial markets, you will likely work on such a team, which will require that at some point you will be required to either write computer code yourself, manage programmers, or work and interact with programmers on projects This will necessitate an understanding of, at the least, Microsoft Excel spreadsheet and the Visual Basic for Applications (VBA) environment, but likely also Visual Basic. NET or... development from a purely technical analysis standpoint, often using a retail software package to optimize a set of trading rules based upon moving averages and oscillators In this book, however, we will focus on quantitative analysis of equities, equity indexes, and options on equities and the programming of professional, proprietary software using Visual Basic. NET Several steps are involved in creating a quantitatively... quantitative research in financial markets requires the completion of these four phases of development resulting in four models: the algorithms model, data model, implementation model, and risk management model Over the remainder of this book, each of these phases, and their subphases, will be addressed Along the way, we will learn a great deal about quantitative finance, Visual Basic. NET, ADO.NET, databases... engineers who want to use UML must be familiar with object-oriented programming and the process of abstraction and application modeling (Don’t worry If you are not familiar with these concepts, we will show you them over the course of this book.) Models written using UML will help us visualize and document the structure of a software application Program and Document the System Having proved the trading system... even some major U.S trading houses (Norman, 2001) In this book, we will show you how to use Visual Basic. NET and several quantitative tools to begin development of some trading strategies and to analyze data, and we will share some ideas about how to connect to industry software via APIs to monitor financial markets and execute trades Figure 1.1 shows graphically how to implement a trading system in... hedging device through the type of framework we described MicroHedge is a popular institutional software package with connections to the options markets And Trading Technologies’ X_Trader software is a popular front-end software system for futures trading on electronic markets Thus, we could create a system to trade the CBOE’s S&P 500 cash options, via a market connection through MicroHedge’s API, that could... trading strategy development: computer science, quantitative finance, trading strategy, and quality development This is a lot to learn We do not attempt teach you all of it Rather we bring together some important ideas from math, technology, project management, and the financial markets that are required to build a real-world automated trading system Team-LRN This page intentionally left blank Team-LRN... to understand how databases are constructed and accessed using computer code to do financial research and develop trading and risk management algorithms and systems All financial research requires data, and the efficient management and storage of data is crucial to the profitable operation of a trading system “Data is the lifeblood of electronic markets, ” as David Norman states in his book Professional... success The more complex the trading idea, the more time it takes to define and communicate it clearly The description of the trading idea should contain the answers to several basic questions: Development Methodology 17 1 What market or markets will be traded? 2 What capital will be traded? a Short term b Long term c Midterm 3 Whose capital is it? Proprietary or investor capital? 4 How will success be defined? . Arrays 13 3 9 Problem Solving 15 1 10 .NET Type System 17 1 SECTION THREE Database Programming: Back Testing 18 5 11 Relational Databases 18 7 12 ADO .NET 2 01 13 Structured Query Language 219 14 Introduction. Interoperability 2 71 17 Connecting to Trading Software 2 81 18 XML 3 01 19 XML Protocols in Financial Markets 323 SECTION FIVE Object-Oriented Programming: Risk Management 3 41 20 Unified Modeling Lanaguage. Methodology 11 SECTION TWO Introduction to VB .NET: Algorithm Development 31 3 Getting Started with VB .NET 33 4 Value Types and Operators 47 5 Control Structures 65 6 Procedures 81 7 Objects 10 9 8 Arrays