Trade Recommendations

Number of Issues

The numberSwapSecuritiesDesired is a constraint specified in the portfolioDataRecord as outlined elsewhere in the User Manual.

Users may be disconcerted to find that the number of issues that are held as a result of executing indicated trades will not necessarily be equal to the number specified. This target number is only loosely enforced by the trading engine by design - it is not considered advantageous to "force" trades simply to adhere to a semi-arbitrary number.

The following enforcement and adjustments are applicable to this specified number:

• When determining the maximum weight of a Risk Attributes in a portfolio, if the maximum weight constraint is set to be non-zero, but less than the inverse of numberSwapSecuritiesDesired, the maximum is reset to be equal to the latter number (see adjustForMaxWeightSector and adjustForIssuerConcentration)
  
  
• When determining the maximum weight of an issue to be purchased, the maximum is set equal to
  
  
  (1.0 + ISSUE_METHOD_WEIGHT_TOLERANCE) * (1.0 / numberSwapSecuritiesDesired)
  
  
  
• The effectiveMinWeight is set equal to
  
  
  MAX(1 / (2.0 * numberSwapSecuritiesDesired), CONSTRAINT_PORTFOLIO_MINWEIGHT)
  
  
  Therefore, trades could be performed, all at this calculated weight, to result in double the desired number of issues being held.See calculateTradeSize.
  
  
• When a number of issues in excess of numberSwapSecuritiesDesired is held in the portfolio, then the holdingsPickupAdjustment will be applied to trades involving the purchase of an issue not already held, with its size dependendent upon the degree by which the portfolio holds issues in excess of numberSwapSecuritiesDesired and the value of PARAMETER_PENALTY_ISSUECONCENTRATION.

Thus, given the definitions of maxWeight and minWeight we see that the expected number of issues in a portfolio will generally be somewhere between numberSwapSecuritiesDesired and double that number. The parameter PARAMETER_PENALTY_ISSUECONCENTRATION will determine the degree of bias towards the lower end of this range.