Real-Time Profit and Loss
As trading automation continues to grow pervasively throughout the capital markets, an increasingly important aspect of optimizing trading strategy is monitoring profit and loss performance in real time. With automated strategies typically trading at high frequencies, it is possible for them to accumulate profit and loss rapidly. While many organizations may compute P&L in batch-mode at the end of a trading day or via Excel spreadsheets, with today’s volatile markets, it has become highly desirable to move to a system of real-time profit and loss calculation. By enabling the profit and loss of a strategy to be monitored in real time, and also allowing the strategy to use these calculations to adjust its own behavior, trading profits can be maximized while risks are minimized.
For example, a strategy may take a similar approach to that used in gambling where the more profit made, the more resources are available with which to trade. Like risk management, it is useful to separate the overall performance of the system (the organization’s true profit and loss) from that of each strategy. By maintaining real-time potential profit and loss calculations for each strategy in conjunction with the risk manager, it becomes possible to identify those strategies or instruments that did not achieve their potential due to overall system constraints and those that are underperforming. This enables the balance between the strategies to be adjusted more accurately.
StreamBase's Event Processing Platform brings value to hedge funds, investment banks, and asset management firms by enabling rapid development, testing, and modification of complicated P&L applications via the StreamBase Studio graphical development environment. In addition, the high performance StreamBase Server handles data rates of up to hundreds of thousands of messages/second, spanning multiple market data feeds and trading teams. The library of pre-built StreamBase adapters enables trading organizations to easily interface with any of a variety of consolidated feeds or exchange feeds, historical data-stores, and interactive dashboards.
One example of a StreamBase customer deriving great value from StreamBase is a European hedge fund with more than €8B in assets. This firm uses StreamBase to continuously update the P&L, position, value, and exposure information across a range of portfolios using real-time market data prices and the underlying cost basis data. Before using StreamBase, the 20,000+ P&L computations were performed across 200 spreadsheets in a batch process at end of day, since the data volumes and complexity made it impossible to run during the day. Now P&L is computed in real time for each fund, for each trading strategy within a fund and across funds, and for each financial instrument. The application has dramatically increased trading profits by enabling the firm to reduce investments in poorly performing strategies or instruments in real-time and increase investments in those which are found to be better performing at a given moment in time.
To evaluate StreamBase for your real-time P&L application requirements, please click here.