"I trust Visual Numerics libraries in my work because they are stable and reliable."

-Adam Shimrat, Quantitative Analyst, Bear, Stearns & Company, Inc.

THE PROBLEM
Bear, Stearns & Company, Inc. (symbol BSC - NYSE) is a leading worldwide investment banking, securities trading and brokerage firm. Corporations, governments, institutions and individuals all over the world recognize Bear Stearns' capabilities in corporate finance; mergers and acquisitions; equity and fixed income sales and trading; private client services; derivatives; securities research; asset management; foreign exchange; futures sales and trading; clearing; and securities lending and custody. The company ranks seventh in terms of capital among the major investment houses and has a dominant position in stock lending and clearance operations. The company employs 9,300 people worldwide.

Bear Stearns equity sales and trading implements trading strategies in 50 developed and emerging markets, and represents more than 30% of the short-selling activity on the New York Stock Exchange. Bear Stearns provides trading systems to the institutional community. It offers trading opportunities in announced takeover transactions, stock repurchases and spin-offs in the United States and abroad as well as access to risk arbitrage research.

Adam Shimrat, a quantitative analyst with Bear Stearns, needed a way to develop a proprietary equity trading system. This system would allow a user to construct a portfolio of stocks that is market neutral. The system strategy would exploit inefficiency in the stock market, such as overreaction, and would be based on technical analysis, such as historical stock prices and volume patterns.

Shimrat wanted to create a program simply. "I didn't want to reinvent the wheel," he says. He also needed it to be easy to use. "This idea was difficult to create in Fortran-based IMSL," he recalls. "Since the whole system is coded in the C language, the link to Fortran-based IMSL required too many corrections."

Shimrat also wanted to use a tool that saved time and money. "It's good business practice to use the most cost-effective solution available," he says.

THE SOLUTION
Shimrat turned to Visual Numerics IMSL C Numerical Libraries. Visual Numerics provides industry-leading, mission-critical software solutions to more than 500,000 business and technical professionals around the world. Scientists, researchers, educators, engineers, developers, intranet managers, testers and analysts use Visual Numerics' decision-support tools to solve problems, identify trends and share results.

Shimrat was familiar with Visual Numerics IMSL C Numerical Libraries. He first used IMSL applications while enrolled in a graduate program at New York University. "I'd been using IMSL in this job and other positions, so I was familiar with its functionality," he says. "One of the advantages of the IMSL routines is that they are computer efficient, a trait that is important in large-scale simulations of historical data."

IMSL provided a shortcut to Shimrat. Instead of writing a new function, the C Libraries provided an existing function he could use.

RETURN ON INVESTMENT
Working on Sun Solaris, Shimrat uses the statistics and optimization routines to select the stocks, perform the calculations and show the performance of stocks over time. The optimization procedure allows a user to create a portfolio that will have a high correlation with a specific stock, allowing the portfolio to be used for risk management. "I use this procedure for forecasting purposes," says Shimrat. He found that the residual between a stock price and an optimized portfolio exhibits mean reversion properties, which he can exploit for forecasting stock price behavior in the short run. "This application is important in my work," says Shimrat, "especially for the optimization of portfolios.

"I trust Visual Numerics libraries in my work," says Shimrat, "because they are stable and reliable."

In the tumultuous world of equity trading, stability and reliability must be reassuring.