Tag Archives: algorithmic trading

Stability of Currency Markets to HFT

Last week @gappy3000 shared the Bank of International Settlements’ autumn 2011 assessment of the impact of high-frequency trading on foreign exchange (currency) markets. For the lazy, here’s a summary of the executive summary: HFT in FX operates on high volume but … Continue reading

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In this paper an exhaustive characterization of financial markets was given. Dependence: Autocorrelation in returns if largely insignificant. (Exceptions being at the tick level and annual returns.) Distribution: Approximately symmetric, increasingly positive kurtosis as the time interval decreases and a … Continue reading

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Stat Arb

The point of statistical arbitrage is to make markets consistent. For example, if GBP trades against USD at 2:1, and USD trades against JPY at 10 000:1, then GBP had better be trading against JPY at 20 000:1 !! ! Anything else wouldn’t … Continue reading

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High-Frequency Trading

The point of high-frequency trading is to smooth markets over time. Imagine that you know a big block order is coming in. Some huge pension fund needs to send 70,000 checks out next week so they’re selling some asset. The … Continue reading

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Contrary to the recently popular “behavioral” approach which proposes to take advantage of economic “irrationality”, I suggest that value-added comes from creating investments with more [psychologically] attractive risk-sharing characteristics. Andrew Lo & Craig McKinlay, A Non-Random Walk Down Wall Street

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No-arbitrage conditions are so often assumed in economics papers that they’ve come to seem magical.  As I read more books by arbitrageurs, the obvious has become apparent:  real people have the job of making financial markets equilibrate. Given that companies … Continue reading

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“The advantage scientists bring into the [investing] game is less their mathematical and technical ability than their ability to think scientifically.”—James Simons, founder of Renaissance Technologies [Q]uants are forced to think deeply about many aspects of their strategy that are … Continue reading

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