OneTick and the R mathematical language, a presentation from R in Finance

Solutions from
OneTick and R
Portfolio & Risk Analytics
Business Cases

Maria Belianina, Ph.D.
Director, Pre-Sales Engineering Support

Contents
 Data Management & Requirements
for Portfolio & Risk Analytics
 R and OneTick: Addressing the challenges
 What is OneTick
 R ↔ OneTick integration: Two available methods
 Examples
 Option pricing with OneTick and R RQuantLib functions
 OneTick Value-At-Risk calculations back to R
 OneTick Portfolio Pricing back to R

Portfolio & Risk Analytics

Data Requirements & Challenges:
 Increasing data granularity  Increasing data volumes
 Daily to continuous intraday  Reference data (corporate
 Milli → Micro → Nano → actions, name
Picoseconds… changes, continuous
contracts, etc)
 Data cleansing challenges
 Access to both High
 Complexity of data and (e.g., Price) and Low
data consolidation (e.g., Volatility) frequency
 Consolidation across product data
types  Security master
 Access to complex calculations maintenance
 Database schema changes
… vs Consolidated Risk and Portfolio Analysis

R AND ONETICK:
ADDRESSING THE CHALLENGES

What is OneTick: Business Cases

Our clients: Business Cases:

 Hedge Funds & Proprietary  Backtesting & Quantitative
Trading Firms Research

 Large Asset Managers  High frequency trading signal
generation
 Banks / Brokers  Pre- & Post- Trade TCA
 Marketplaces  Backbone for
 Technology & Information Charting / Time and Sales
Providers  Compliance & Regulatory
Reporting
 Risk & Portfolio Analytics

What is OneTick: Overview
About data model:
- Time series with customizable &
flexible schema for any asset type
Real-Time OneTick Servers
Feeds - High and Low frequency
- Data collectors
- Consolidated - In-memory intraday
- Reference data support (corp
(Reuters, Bloom actions, continuous contracts,
tick database[s]
berg, etc) symbology, calendars, etc.)
- Exchanges - Historical archives
- Custom feeds (file About analytics:
based, unlimited, dist - Time series generic functions:
Historical ributed) Aggregation, filtering, signal
Data - Analytical Engine generation, calculated fields, etc.
for - Time sensitive Joins & Merges
Historical, Intraday across symbols, databases and
- Ascii
and CEP real-time tick types
- Proprietary binary
- ODBC source queries. Extendable - Finance functions (order book
- 3rd party (NYSE via: snapshots and consolidation,
TAQ, CME, etc) R, C++, C#, Java, Pe statistics, pricing, portfolios)
rl & Python
Real-time Out-of-box Batch Out-of-box or
or custom API custom API

What is OneTick: Client Side
End Users & Client Apps:
OneTick GUI
Real-Time OneTick Servers Design & debug
Feeds - Data collectors queries, view results, tune
- Consolidated performance
- In-memory intraday
(Reuters, Bloom
tick database[s]
berg, etc) OneTick API
- Exchanges - Historical archives C++, C#, Java, Perl, Pyt
- Custom feeds (file hon
based, unlimited, dist
Historical ributed) R
Data - Analytical Engine
for MatLab
- Ascii Historical, Intraday
and CEP real-time Excel
- Proprietary binary
- ODBC source queries. Extendable ODBC clients
- 3rd party (NYSE via:
TAQ, CME, etc) R, C++, C#, Java, Pe Command Line Utility
rl & Python
Real-time Out-of-box Batch Out-of-box or TCP/IP Real-time
or custom API custom API or on-demand

What is OneTick: GUI Analytics
Query Example:
Bollinger Bands
Buy/Sell Signals

A “Nested
query” for
Bollinger
Bands
calculations

NOTE: One of the nodes can
be an R Event Processor
calling R functions

What is OneTick:
Analytics + Financial Reference Data
Reference data can be* mixed with analytics:
 Symbol Name History
* Note:
 Name changes
 Continuous contracts Market data is stored
“as is”
 Symbology Mapping
across databases Reference data is stored
(e.g., CUSIP to SEDOL) separately and
 Corporate Actions can be applied as needed
 Splits, dividends, etc
 Continuous Contracts
 E.g. query “ES**” futures as one contract: “ES”
 Currency Conversion
 With monthly, daily or intraday exchange rates
 Market, Exchange & Symbol Calendars

What is OneTick: GUI Analytics + R
Query
Example:
using R
functions

 Create running (a.k.a. sliding)
aggregation of 32 ticks
 Call R function acf(…)
for each sliding group
 Pass values of MID and LAG
from tick fields or query parameters

 Process the results of
R function output

System Integration: OneTick and R
OneTick allows to: R allows to:
If YOU Store compressed fast access data  Retrieve OneTick query output
work in Pre-process data: in R code via ODBC/OneTick SQL:
R:  Normalize and clean • Call tested OneTick query
 Apply reference data • Pass parameters
 Aggregate, intervalize, filter • Process results in R as usual
 JOIN/MERGE trades vs order TIP: Limit amount of data
books, news, weather reports, etc. processed within ODBC and R
 Set query parameters aggregating & filtering data in
OneTick query
If YOU  [Above] + Call any number of  Map OneTick fields to R input
work in OneTick or R functions • R scalar types or matrices
OneTick  Call separate R functions for a  Load required R libraries
GUI: bucket entry or exit events  Specify R code to apply
 Run historical or CEP queries  Specify OneTick aggregation
 View query results via GUI or API parameters
 Map R output back to OneTick
fields for further OneTick processing

TIP: Take full advantage of both packages.

Example 1:
OPTION PRICING IN ONETICK
WITH OR WITHOUT R FUNCTIONS

Example: Option Pricing in OneTick/R

Sample Business Case
I. Input:
a. OneTick archive or real-time market data for
American equity options and underlying equities (optional)
b. Additional calculation parameters (e.g., underlyer volatility and
interest rates) can be pre-calculated, pre-loaded from external
sources or passed as query parameters
II. OneTick Query must produce
a. Option Values at a specified time interval
(depends on the frequency of the available data)
b. Optional: Greeks
c. Optional: Apply corporate actions to the underlyers’ prices
III. Results
a. View in OneTick GUI in on-demand or continuous CEP mode
b. Bring back to R on demand for plotting and further processing


I. Input:
a. OneTick archive or real-time market data for
American equity options and underlying equities (optional)
b. Additional calculation parameters (e.g., underlyer volatility and
interest rates) can be pre-calculated, pre-loaded from external
2 sample out-of-box solutions
sources or passed as query parameters
within OneTick query design:
a. Option Values at a specified time OneTick OPTION_PRICE
1. Using interval
(depends on the frequency of the available data)
function
b. Optional: Greeks
c. 2. Using OneTick R function to
Optional: Apply corporate actions to the underlyers’ prices call
RQuantLib library, function
III. Results
AmericanOption
a. View in OneTick GUI in on-demand or continuous CEP mode
b. Bring back to R on demand for plotting and further processing


OneTick Prep Steps Include:
1. Retrieve a list of underlying equities
(csv, ODBC, OneTick archive or via GUI, other)
2. Retrieve, calculate or pass equity volatility as a
parameter
3. Retrieve a list of options for the above
Optional: Filter by the specified maturity and other parameters
4. Make sure each tick contains all the required attributes
5. Call OneTick R function (a.k.a. Event Processor)
1. Initialize RQuantLib library
2. Call AmericanOption function
6. Process R output

OneTick Sample Query Graph Design
Retrieve corresponding option
Retrieve equity prices master data and prices
OT Archive or
CEP Engine

Tick Processing
• JOIN equity and option data
for each equity symbol

Call R code with R Event Processor
• to calculate each
option value
• for the specified
bucket interval

• Calculate statistics based on
R_OPTION_VALUEs
• In “running” mode, re-calculating
on each R output tick

OneTick Sample Query: Calling R functions

Bucket interval
aggregation for
passing ticks to R

R call parameters:
mapping fields, R code
and special instructions

R Functions in OneTick: Parameters
2 subsets of parameters that work together:

OneTick aggregation R function specifications
BUCKET_INTERVAL, UNITS and R_INITIALIZER to specify one time
optional GROUP_BY only initial command
to aggregate ticks into buckets R_MACRO_PREFIX for naming
OUTPUT_INTERVAL and UNITS INPUT, OUTPUT, R_CALCULATOR to
to define frequency of output for map tick fields to R variables and specify
running calculations R command.
Note: A combination of
BUCKET_INTERVAL and INPUT can be
used to pass matrices into R
IS_RUNNING = true/false R_ENTERING/LEAVING_
for running (a.k.a. sliding) TICK_HANDLER to call different
calculations functions for BUCKET_INTERVAL entry
and exit events in RUNNING
aggregations
Other parameters for additional
flexibility with aggregation

OneTick Sample Query: GUI Output
Query parameters
(passed from GUI or any calling application):

• Standard

• Custom for each query

View results in OneTick GUI grid, debugger, profiler or chart:

An alternative: OneTick OPTION_PRICE function

Description:
For each
bucket, computes
call/put option
price and related
Greeks based on Bucket interval
the Black-Scholes aggregation for
option pricing passing ticks to R
model.

An alternative: OneTick OPTION_PRICE function

DESIGN STEPS:
• Retrieve option
info
• Retrieve
underlyer PRICE
• Use
OPTION_PRICE
event processor

View results in OneTick GUI grid, debugger, profiler or chart:

Example 2:
- VALUE-AT-RISK IN ONETICK
- RESULTS BACK TO R

Example : Historical VAR in OneTick


I. Input:
a. Equity portfolio composition (from csv, ODBC or OneTick)
b. Historical daily prices for all portfolio constituents
for the specified number of days (preferably 500+)
For the past X days and Percent P
a. Historical Value-At-Risk 1-day values
b. Historical Value-At-Risk N-day values
III. Results Back to R on demand
for plotting and further processing

Prep Steps – Query 1:
• Get portfolio & calculate
estimated volatility
• This query is executed
as an input to the main
query

Notes:
We’re using definition of the daily volatility described by J.C.Hall in
“Options, Futures and Other Derivatives”:
Daily Volatility = Standard Deviation ( Price Percentage Change in 1 Day )

Using OneTick:
• Price Percentage Change in 1 day:
PERC_CHANGE = (CLOSE-CLOSE[-1])/CLOSE[-1]
where LAST is the closing PRICE for the trading day,
and [-1] refers to the previous CLOSE tick
• ESTIMATED_VOLATILITY = STDDEV(PERC_CHANGE)
over a period of time specified as
STDDEV aggregation function bucket interval

Query 2
For each security from the list above
• Retrieve daily or high frequency data
• Calculate significant number of loss
scenarios

• MERGE all calculated timeseries
for all securities into 1 for further
portfolio level calculations

• Calculate and rank portfolio
LOSSES across scenarios
• Calculate Value-At-Risk and
Expected Shortfall

OneTick Sample Query: Nesting and Ranking
Nested Query: Use of aggregation and ranking

• Aggregate to 2
Query
get PORTFOLIO
• Retrieve daily or high frequency data
VALUE and
• Calculate significant INVESTMENT
number of loss
scenarios

• Calculate LOSS

portfolio level calculations ticks by
• Rank
LOSS

…

OneTick Sample Query Graph Output in GUI
Query 2
• Retrieve market data
• Calculate $NO_OF_SCENARIOS scenarios
• Can use daily or high frequency data as a
start

portfolio level calculations

• Calculate and rank portfolio
LOSSES across scenarios
• Calculate Value-At-Risk and
Expected Shortfall
• Results: Summary and Detail

OneTick GUI Grid Output

OneTick Historical VaR Results Back to R
library(RODBC)
Sample Code: R 2.10.1
# Define function to create
# OneTick SQL string
 Load RODBC library
omdBuildSQLQuery <- function(otq, start_time, end_time, tz, ...){ an R function similar to
 Create
start_time_tz <- paste(start_time, tz)
end_time_tz <- paste(end_time, tz) omdBuildSQLQuery to build
OneTick SQL string with parameters
sql <- paste("SELECT * FROM OMD.OTQ_FILES."", otq, "" otq ", sep="")
sql <- paste(sql, "WHERE ", sep="")  Connect to OneTick & pass SQL
sql <- paste(sql, "(otq.TIMESTAMP>='", start_time_tz, "') ", sep="")
 Get query results
sql <- paste(sql, "AND (otq.TIMESTAMP<'", end_time_tz, "') ", sep="")
 Process as usual
parms<-list(...)
for(n in attributes(parms)$names) {
sql <- paste(sql, "AND (param_assign('", n, "','", parms[[n]], "')=1) ", sep="")
}

# Open ODBC channel to connect to OneTick server[s]
channel <- odbcConnect("OMD_LOCAL_DSN")

# Call OneTick query VaR_Historical_ saved in the query file var_model_running.otq:
sql<-omdBuildSQLQuery("var_model_running::VaR_Historical_",
"2009-01-01 09:30:00",
"2011-01-01 09:30:00",
"EST5EDT"
); sql
results<-sqlQuery(channel, sql); results

OneTick Historical VaR Results Back to R
…..
# Open ODBC channel to connect to OneTick server[s]
channel <- odbcConnect("OMD_LOCAL_DSN")
# Call OneTick query VaR_Historical_ saved in the query file var_model_running.otq:
sql<-omdBuildSQLQuery("var_model_running::VaR_Historical_",
"2009-01-01 09:30:00",
"2011-01-01 09:30:00",
"EST5EDT"
); sql
results<-sqlQuery(channel, sql); results

# Plot the results:
plot(results[, c("PERCENT","VAR_1_DAY")])
title(main="Portfolio Historical 1 Day VaR and Expected Shortfall", col.main="blue", font.main=3)
lines(results[, c("PERCENT","ES")], type="o", pch=22, lty=2, col="red")

Example 3:
- PORTFOLIO PRICING IN ONETICK
- RESULTS BACK TO R

Portfolio Pricing in OneTick

I. Input:
a. Portfolio or Portfolio of Portfolios composition
source (CSV, ODBC source or OneTick database); can
include weight, side and any other attributes
b. Market data
II. OneTick Query must produce Portfolio Prices:
a. Long, Short and Total side by side
b. At a specified interval
c. Optional: With corporate actions applied to prices
d. Optional: In specified currency
III. Results Back to R on demand
for plotting and further processing

Portfolio Pricing in OneTick: Sample Input

#SYMBOL_NAME,WEIGHT
A,400
CSCO,-500
GS,600
IBM,-700
MSFT,-900

Portfolio Pricing in OneTick: Design

OneTick portfolio related aggregation event processors:
PORTFOLIO_PRICE and MULTI_PORTFOLIO_PRICE
OneTick Query Design Steps:

1. Specify portfolio
2. Retrieve prices
3. Apply CORP_ACTIONS event processor
(make sure the corresponding reference data is loaded)
4. Use PORTFOLIO_PRICE event processor
or
Use COMPUTE “meta-aggregation” event processor to compute
side by side:
• LONG PORTFOLIO_PRICE
• SHORT PORTFOLIO_PRICE
• 2-SIDED PORTFOLIO_PRICE
5. Bring results back to R

THANK YOU

Information:
info@onetick.com
www.onetick.com

OneTick and the R mathematical language, a presentation from R in Finance

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