Simulations

Definition

Estimating the potential outcomes for a model by running it on historical data (see backtesting) or randomised data (see Monte Carlo Simulations).


Simulated Pasts, Presents and Futures

The notion that we are living in a computer simulation has provided fertile ground for storylines in popular culture. At Winton, we use simulations for application in the real world: we code investment rules into computers and run them against historical market data to test how they would have performed.

For a long time, the major hurdle to running realistic simulations was computational. David Harding, Winton’s CEO and founder, has reminisced about the technological challenges he and his partners faced 30 years ago when starting out in systematic investing: “We were always waiting for a new, more powerful Hewlett Packard model to turn up so we could run the experiment [faster] that was now taking 36 hours to run.” As the models that David and his partners were developing became more complex, the experiments took longer to run, quickly pushing the latest technology to its limits.

Thirty years on, we no longer have to wait for a new computer to come out: technology as a barrier to testing new ideas has been greatly diminished by the exponential growth in computing power. Today, thanks to the cloud, Winton is able to increase its available computing power by several orders of magnitude, on demand and almost instantaneously. Not only can we quickly and efficiently produce detailed simulations of how our systems would have performed in the past, we can also perform real-time calculations for numerous portfolio metrics and risk statistics.

Approach

We design intelligent investment systems that evolve as financial markets change through time. Our decisions are driven by the empirical analysis of data, rather than instinct or intuition.

Strategies

Winton’s systematic strategies are all underpinned by the belief that markets, rather than being efficient, exhibit hard-to-detect yet identifiable patterns.

Research

Winton’s considerable investment in scientific research has produced a wide range of new innovations ranging from new investment strategies to enhanced research methodology.