# Tag Info

10

The best explanation/theory that I have heard about Knight's erratic trading was put forth by Nanex. I have pasted their summary of findings below. We believe Knight accidentally released the test software they used to verify that their new market making software functioned properly, into NYSE's live system. In the safety of Knight's test ...

7

I can think of an application in options pricing. I came across the following paper a long time ago but think it explains FT very eloquently as applied to pricing options under BS: http://maxmatsuda.com/Papers/2004/Matsuda%20Intro%20FT%20Pricing.pdf The fun starts on page 112 but it relies on the 1998 paper by Madan and Carr. What I like about the paper ...

5

Each venue will allow diferent order types, and will have different matching rules (the queue positions you mentioned), so this is not general to the whole market, but this is a paper from Nyse that is pretty much explains most of the order types I have heard of: http://www.nyse.com/pdfs/fact_sheet_nyse_orders.pdf Also, one factsheet/regulation from the ...

5

Re the first part of the question: Quants play no role whatsoever in the actual execution tasks of trading regardless of frequency or whether we talk systematic trading or not. Its done by traders/execution traders (especially on the discretionary side) and not by quants. As your title suggests your focus is on hft, I still would claim quants do not really ...

5

"quote spam", "book colouring", "quote stuffing", etc encompass any mechanism to modify the shape of the orderbook by a market participant who does not intend to really buy or sell shares thanks to these orders. It means that someone fills the bid side of the book with 10,000 shares at different levels of price and does not want to buy at all, or only 100 ...

5

The main application I know of is in option pricing. Peter Carr has done some research here. For an introductory article see this one: Option valuation using the fast Fourier transform by Peter Carr and Dilip B. Madan: In this paper the authors show how the fast Fourier transform may be used to value options when the characteristic function of the ...

5

If you're missing ticks, then no technique will get those ticks back. If you have two sources, then designate one source as the primary feed and then fill-in gaps from the secondary feed. Of course, you'll have to mind the timestamps when determining whether the secondary feed can be used properly.

4

You will struggle to put a number on the potential returns of high-frequency trading (HFT) and I think it wouldn't make any sense anyway if you don't take into consideration its risk and its leverage. Achieving 100% return with low volatility seems highly improbable; so ask the trader in question his Sharpe ratio to start with and compare it with yours. ...

3

Whether its possible? Absolutely. However, you should probably keep in mind a couple points: * Many people claim a lot while proving very little to none. This is fine if the issue is a small-talk conversation. Believe it or not, no harm done. However, this is about money, and from my experience I cannot stress enough how important it is to do a very ...

3

To quickly answer and address your first question. ARMA - Fractionally integrated GARCH or FIGARCH is one of the more common methods used at higher frequencies, it handles some properties required for higher frequency that standard ARMA-GARCH does not There are also a few other so called long memory volatility models, and there are other models which i ...

3

Obviously merging two streams is harmless and it should be done. But it's hard to advise you regarding the "interpolation" methods you can use to generate the ticks without knowing why you need this. The reason is that any method will introduce a certain bias to the data. Therefore, it very much depends on what are you going to do with your altered data on ...

3

Update via Bloomberg Knight Capital Group Inc. (KCG)’s $440 million trading loss stemmed from an old set of computer software that was inadvertently reactivated when a new program was installed, according to two people briefed on the matter. Once triggered on Aug. 1, the dormant system started multiplying stock trades by one thousand, according to the ... 3 Haim Bodek worked for Goldman and UBS and then had his own trading firm. He has started Consulting on HFT strategies and has been mentioned in Dark Pools by Scott Patterson. Some of his white papers are on: http://haimbodek.com/research.html Check out the introduction to the '0+' strategy. As a previous answer stated, no one will give away a winning ... 2 You could try net positions: where you continuously buy and sell depending on the signals generated. Net positions may lead to unnecessary commissions/spread nickel-and-diming your profits away. Once you have picked a direction and already have trade entry, your system should instead continue looking for new signals in the BACKGROUND. New signals while in ... 2 The answer depends on the reasoning behind your forecast. Is this a mean-reversion signal? If so, perhaps the presence of a short signal shortly after a long signal indicates that the long signal was very profitable, and you should take profits immediately. Is it a momentum signal? If so, then perhaps the momentum of this stock is very choppy at the ... 2 If you designed the model to predict direction only, I would just use the current signal. You could test whether this is correct by calculating the signals and their 5-second lags, then regress 1-minute forward returns (or 55-second fwd returns) on them both, and see if the coeff on the 5-second lagged signal is significant. If it's not significant, just ... 2 Everyone can do what HFTs do, if they spend the necessary time and money to build and run the infrastructure required. This may involve becoming a regulated broker/dealer, but it is in no way an invite-only club. Now, to your specific question, you'll find some information on Haim Bodek's site. Bodek does content that ISO's and Day ISOs are used to gain ... 1 With all due respect, the referenced pdf is nothing but a glossy write up of standard terms that you even hear about on TV nowadays, not much more. I assume its targeting totally uninformed clients (Japanese buy side funds? ;-) who in 2012/2013 still have not caught on with algorithmic execution. "Pinging" is so outdated that I would claim the information ... 1 One solution I have been considering is to add a target position parameter with a time decay. For example, given the$t_1$buy and$t_2\$ short signals described in the question and assuming a 5 seconds signal window to simplify, we would have the following time-based target positions: ╔════════════════╦═══════╦═══════╦═══════╦═══════╦═══════╦═══════╦════╗ ║ ...

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