by Brian K. Hurst, Yao Hua Ooi
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Suggested foundations for trading research and honest backtests and rates and fixed income. Specialist prerequisites vary by paper.
Use only information available at the simulated decision time.
Separate model selection from the final evaluation.
Understand discounting in a stochastic-rate model.
Translate yield movements into first-order price risk.
Reconcile signals, executions, positions and P&L.
Include the costs that can erase a paper strategy.
Build a consistent discount curve.
Choose a reproducible strategy, specify the trading rule, and test what remains after costs and estimation uncertainty.