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Optimal Trading of ETFs: Spreadsheet Prototypes and Applications to Client-Server Applications

Author

Listed:
  • Andrew Kumiega

    (Center for Professional Development, Illinois Institute of Technology, Chicago, Illinois 60616)

  • Ben Van Vliet

    (Stuart School of Business, Illinois Institute of Technology, Chicago, Illinois 60661)

Abstract

This paper presents an application of an Excel spreadsheet-development methodology used by quantitative analysts and traders in financial markets. The spreadsheet used regression and Excel's Solver to determine the optimal investment of a firm's risk capital. The proprietary methodology used to develop real-time trading tools and its repetitive design structure allowed the firm to become a market-maker exchange traded fund (ETF) rapidly. By adhering to the methodology, the firm's documentation of user requirements, data inputs, calculations, and user interfaces, and a full prototype using Excel, made incremental growth possible and provided a solid foundation for conversion into coded software. Rapid development gave the firm the opportunity to derive revenue from market-making activities in new investment products; these would become a major source of revenue. This methodology, which the authors presented in 2001 at the International Conference on Software Quality in Pittsburgh, Pennsylvania, and its implementation led to the development of a complete trading-system development methodology.

Suggested Citation

  • Andrew Kumiega & Ben Van Vliet, 2008. "Optimal Trading of ETFs: Spreadsheet Prototypes and Applications to Client-Server Applications," Interfaces, INFORMS, vol. 38(4), pages 289-299, August.
    • Handle: RePEc:inm:orinte:v:38:y:2008:i:4:p:289-299
    DOI: 10.1287/inte.1080.0359
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    References listed on IDEAS

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    1. Barry C. Smith & Ross Darrow & John Elieson & Dirk Guenther & B. Venkateshwara Rao & Faker Zouaoui, 2007. "Travelocity Becomes a Travel Retailer," Interfaces, INFORMS, vol. 37(1), pages 68-81, February.
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