A good starting point is: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=141615 It describes how the quants do it.
I am not really sure, but it could be that this paper is rather misguiding since it completely ignores all transaction cost. We could not reproduce that results under real conditions I think, at least this rather simple approach does not work anymore. things changed drastically at the end of the nineties IMO. peace