Paper: arXiv 2411.14068

Abstract

We present a series of equations that track the total realized and unrealized profits and losses at any time, incorporating the spread. The resulting formalism is ideally suited to evaluate the performance of trading model algorithms.

Complexity vs Empirical Score

  • Math Complexity: 3.5/10
  • Empirical Rigor: 2.0/10
  • Quadrant: Philosophers — conceptual discussion, limited math and data

Why this score: The paper presents a series of algebraic equations to formalize profit and loss calculations, which is moderately math-intensive but lacks the deep stochastic calculus or advanced statistics often seen in quant finance research. Empirically, it is a theoretical guide with illustrative examples but no backtested performance, real-world datasets, or implementation code.

Research Flowchart

  flowchart TD
  A["Research Goal: Develop<br>algorithms to track<br>realized & unrealized PnL"] --> B["Key Methodology: Mathematical Formalism"]
  B --> C["Data/Inputs: Trades, Prices, Spread"]
  C --> D["Computational Process:<br>Equations for PnL Calculation"]
  D --> E["Key Findings: Robust<br>Performance Evaluation"]