this question is actually related to set the stop loss and stop return. Say after a liquidity shock, I want to place two stops, one being stop loss and another being stop return. If I use, say 10 seconds return for the next one minute to collect historical data, I am pretty sure the return is not iid, most likely serial correlated.
If return is iid, I believe I can simulate 6 step price using monte carlo simulation to find return expectation for different stop loss and stop return pair.
But in this case, it is not iid, what is the approach to find the return expectatoin based on historical data, when the expectation is like barrier option that is path dependent?