Trade Recommendations

Trade Score

As stated in the glossary, tradeScore is :

A constrained equivalent of tradeScoreUnrestricted. If the optimizableParameter tradeScoreCap is defined and is less than the value of tradeScoreUnrestricted, then "tradeScore" is set to this lesser value.

Values of "tradeScore" for all trades examined may be viewed on the tradeReport via the "View|Trade Scores" selection on the tradeMenu.

The best three trades ranked by "tradeScore" may be displayed in the bestTradesReportBox (which will report the "tradeScore") via the "by tradeScore" selection on the tradeMenu|Reports|BestTrades popup menu.

This value is also reported in the tradeEvaluationReportBox.

tradeScoreUnrestricted is:

An indicator of the degree to which a trade is calculated to be an improvement to the portfolio. In swaps and portfolio trades of partial positions, it is calculated as:

tradeScore = 100 * (totalRequiredPickup - offerToBidPickup) / (bidToOfferPickup - offerToBidPickup)

and in situations in which the investment is being made solely from cash it is set equal to tradeDesirability.

Thus, a "tradeScoreUnrestricted" in excess of 100 indicates that the trade is an improvement even when selling at the bid and purchasing at the offer; whereas a "tradeScoreUnrestricted" of 0 indicates that the trade should be performed only if the portfolio can sell at the offer and purchase at the bid. The scale is open ended, allowing a quick indication of just how close or far away a given trade is at the given price levels.

This value is used in the further calculation of tradeScore. The value of "tradeScoreUnrestricted" is reported in the bestTradesReportBox and the tradeEvaluationReportBox.

tradeScoreCap is:

An optimizableParameter with the identifier PARAMETER_TRADING_TRADESCORECAP used in the calculation of tradeScore to limit the tradeScoreUnrestricted (and also in the calculation of tradeDesirability to limit the value of tradeDesirabilityUnrestricted) that would otherwise be used in subsequent calculations.

The value of this parameter is constrained to be greater than 100.0.

This parameter is reported in the analyticalParametersReportBox.

totalRequiredPickup is:

A calculated value equal to:

"totalRequiredPickup" = requiredPickUp * riskDistance

The value is used in the determination of the tradeScore.

This value is reported in the tradeEvaluationReportBox.

offerToBidPickup is:

A calculated value used in the subsequent calculation of tradeScore, which presumes that the instrument sold may be sold at the ask while the instrument bought can be bought at the bid. It is calculated as:

offerToBidPickup = buyValuationBid - sellValuationAsk + rewardDecreasesValuation - excessRewardDifferenceValuation - holdingsPickupAdjustment - totalFrictionAsk

This value is reported in the bestTradesReportBox and the tradeEvaluationReportBox.The calculation of this value is shown in the pickupCalculationBox.

bidToOfferPickup is:

A calculated value, used in the calculation of tradeDesirability and tradeScore, calculated by comparing the valuations of the two instruments involved in the trade, valuing the instrument to be sold at the bid and the instrument to be purchased at the offer

bidToOfferPickup = buyValuationAsk - sellValuationBid + rewardDecreasesValuation - excessRewardDifferenceValuation - holdingsPickupAdjustment - totalFrictionBid

The best three trades ranked by "bidToOfferPickup" may be displayed in the bestTradesReportBox via the "by bidToOfferPickup" selection on the tradeMenu|Reports|BestTrades popup menu.

This value is reported in the bestTradesReportBox and the tradeEvaluationReportBox. The calculation of this value is shown in the pickupCalculationBox.

The most important thing to note about "tradeScore" is that is is scaled: a "tradeScore" of zero implies that the trade is considered beneficial to the portfolio only if it can be executed by selling at the offer price and buying at the bid price; while a score of 100 implies that the portfolio may be improved by selling at the bid and buying at the offer; that is, paying the full spread.

Potential trades with a "tradeScore" of less than zero are not considered beneficial even if executed at the most favourable market-based prices, while a "tradeScore" between 0 and 100 may be examined ... it is considered beneficial if it can be executed at some spread inside the market quotation.

"tradeScore" is best examined if an examination of the weightedTradeDesirability values indicates that no trades may be executed at full spread; it provides a good indication of how aggressive one must be in order to execute a beneficial trade.

Values used in the calculation of "tradeScore" may be found via:

Value	Reported on	Via Menu
bidToOfferPickup	pickupCalculationBox	tradeReportContextMenu (right-click the appropriate grid element on the tradeDocument
offerToBidPickup	pickupCalculationBox	tradeReportContextMenu (right-click the appropriate grid element on the tradeDocument
totalRequiredPickup	tradeEvaluationReport	tradeReportContextMenu (right-click the appropriate grid element on the tradeDocument
tradingValuationBid	riskRewardAnalysisBox	tradeReportContextMenu (right-click the appropriate grid element on the tradeDocument
tradingValuationAsk	riskRewardAnalysisBox	tradeReportContextMenu (right-click the appropriate grid element on the tradeDocument