Generating virtual scenarios of multivariate financial data for quantitative trading applications

Understand

In this paper, we present a novel approach to the generation of virtual scenarios of multivariate financial data of arbitrary length and composition of assets.

• With this approach, decades of realistic time-synchronized data can be simulated for a large number of assets, producing diverse scenarios to test and improve quantitative investment strategies.
• Our approach is based on the analysis and synthesis of the time-dependent individual and joint characteristics of real financial time series, using stochastic sequences of market trends to draw multivariate returns from time-dependent probability functions preserving both distributional properties of asset returns and time-dependent correlation among time series.
• Moreover, new time-synchronized assets can be arbitrarily generated through a PCA-based procedure to obtain any number of assets in the final virtual scenario.