FX: Different testing no guarantee of better outcomes

While the ability to run simulations based on hypothetical future as well as historic data is appealing, there is no guarantee that testing algos against both types would make them operate more efficiently in stressed market environments.

Advanced simulation models are not a recent phenomenon – they have been used for many years in disciplines such as climatology and physics to study ‘what if’ scenarios. But increased availability and affordability of computing power have brought these techniques within the reach of banks and other FX market participants.

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Justin Lyon, Simudyne

According to Justin Lyon, CEO of Simudyne, advanced simulation models based on synthetic future data are able to prepare algos to deal with unprecedented market conditions rather than simply shutting down in the face of volatility, which can mean immediately exiting or hedging all current positions or simply not sending any orders at all until the unprecedented condition passes.

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