From Patterns to Predictions: Harnessing Price Backtesting For Deeper Market Insights
PeerNova Inc
PeerNova’s mission is to empower firms to make confident and timely decisions using high-quality data.
Financial firms use price backtesting to compare, corroborate, and evaluate the performance of their pricing models (both their actual pricing models and consensus models) against actual market trade, quote, and order activities. This process helps them identify potential risks, and confirm the robustness of their pricing strategies. Regulators require regular backtesting to ensure pricing models are accurate and adequately reflect market pricing movements.
Backtesting allows you to perform price corroboration of valuation models using historical data, optimize and de-risk valuation strategies, and uncover areas of over- or under-estimation. It helps identify potential trends or shortcomings in valuation models, mitigates the overall risk of losses, and ensures regulatory compliance. Additionally, backtesting validates the accuracy of data sourced from external providers, further strengthening the reliability of valuation practices.
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