System Parameters Randomization, better than “System Parameters Permutation”
2 replies
Kristoffer
2 years ago #276934
Hello,
There is an interview with Dave Walton, creator of SPP (System Parameters Permutation) where he talks about a better way of approaching this .
The idea is to take the SPP and put a Monte Carlo function on top of it. Monte Carlo selection engine overlaid on top of SPP.
Here is the paper by Dave Walton:
http://bettersystemtrader.com/system-parameter-permutation-a-better-alternative
“In order to address all of these, I’d like to introduce a close cousin of SPP which I named System Parameter Randomization (SPR). The fundamental mechanism behind both SPP and SPR is the same, yet the implementation is very different. SPR can be thought of as a random sample of a continuous SPP distribution. The process is explained in the steps below:
- Parameter scan ranges for the system concept are determined by the system developer.
- A Monte Carlo process is used to pick individual parameter values within in the scan ranges.
- A fixed number of iterations is performed using a realistic portfolio-based historical simulation over the selected time period.
- The simulated results for each system variant are combined to create a sampling distribution for each performance metric of interest (e.g. CAR, max drawdown, Sharpe ratio, etc.). Each point on a distribution is the result of a historical simulation run from a single system variant.”
Full interview:
http://bettersystemtrader.com/051-dave-walton/
tomas262
2 years ago #276947
Hello,
that’s a good point, thanks for sharing! I have notified Mark about this to check …
Estrategias Ganadoras de Trading
11 months ago #282228
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