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Questions tagged [high-frequency]

For questions dealing with market data sampled at high frequencies, such as tick data and intraday data.

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1 vote
0 answers
54 views

How to hedge an options portfolio in hft settings?

Suppose that you are quoting multiple option strikes on multiple levels and getting hit very often. Such trading possesses a challenge from a risk management perspective. To stay delta neutral you ...
4 votes
2 answers
436 views

Continuous prediction vs Event-based predictions

When making a high-frequency or mid-frequency prediction on an assets return, what are the advantages and disadvantages of making a continuous prediction vs a prediction that only fires on a ...
1 vote
2 answers
130 views

MM quotes replacement time in HFT

Market Makers quote on the minimum quote requirements of the market set by regulators, and they are also free to quote as they wish. In High Frequency Trading, when quotes are hit, MM will replace ...
5 votes
1 answer
106 views

High Frequency Market Making When Short Selling Is Prohibited

I am seeking insights on high-frequency market making strategies in markets where short selling is prohibited. While browsing through research papers and quant.stackexchange.com, there's frequent ...
0 votes
1 answer
92 views

Optimal Price Metric for High-Frequency Volatility: Executed Price, Mid Price, or Weighted Mid Price?

In the context of high frequency trading, I'm exploring the application of the mean absolute deviation estimate for high-frequency volatility calculation. What would be the optimal choice for this ...
0 votes
1 answer
80 views

Exchange redirecting order

I was reading about exchange to understand better how they execute my market-orders. So let's say I am sending a market order to buy one share of AAPL to NYSE. When NYSE gets my order he looks at the ...
0 votes
1 answer
144 views

What are some quantitative approaches to figure out Flow Based Alphas on extremely small lookout periods and does 'flow' play a significant role?

I was pondering over the dynamics of the Market Microstructure trying to couple it with some directional flow based alphas but for extremely small look out periods. Does it even make sense to go for ...
4 votes
1 answer
2k views

Beginner to high-frequency trading

I am extremely new to the field of high-frequency trading. I have been trying to read a ton of materials out there to understand the general workflow. I have very basic knowledge of different concepts ...
5 votes
1 answer
294 views

How do market participants know intentions of other players

I'm reading a paper on order anticipation strategy and came across this line in the paper: We assume that all model parameters, including n and ...
1 vote
1 answer
87 views

How to calculate the spot variance from the TSRV (Two-Scale Realized variance)

If the TSRV is given by: $$TSRV = \frac{1}{K} \sum_{i=K}^{n} (S_i - S_{i-K})^2 - \frac{\bar{n}}{n}\sum_{i=1}^n (S_i - S_{i-1})^2 $$ where $\bar{n} = \frac{n - K + 1}{K}$, with $n$ is the number of ...
3 votes
1 answer
631 views

Dealing with the inventory risk: solution with drift

I'm implementing the solution with drift from "Dealing with the inventory risk" from Gueant, Lehalle and Tapia. I'm using the link https://arxiv.org/pdf/1105.3115.pdf as reference. I can ...
0 votes
0 answers
49 views

dependence between trading instants and price in market microstructure

Can someone suggests readings regarding the dependence between sampling schemes and prices at which they are sampled in high frequencies context ? Is there a relationship between prices and times?
1 vote
1 answer
95 views

the pre-averaging function in Jacod et al

In the paper of jacod et al the authors used the pre-averaging function to deal with microstructure noise. They suggest the easiest function which is $$\bar{Z_i} = \frac{1}{kn} \left( \sum_{j=kn/2}^{...
0 votes
0 answers
98 views

How to model the imbalance to predict in different timeframes?

As widely shown in this forum and in the literature, the order book imbalance is empirically a good predictor of the market move. However, even though the calculation of the imbalance is very straight ...
0 votes
0 answers
123 views

Gueant–Lehalle–Fernandez-Tapia formulas for varying volatility

There are formulas proposed by Gueant–Lehalle–Fernandez-Tapia related to the optimal bid and ask in market-making models (Optimal Market Making by Gueant or The Financial Mathematics of Market ...
4 votes
2 answers
732 views

Highest resolution of stock data?

Out of curiosity, I'm wondering what the highest resolution of stock data there is out there. Is there stock trading data for every nanosecond, picosecond, or even lower? And how is this limit ...
2 votes
1 answer
419 views

Standard ways of simulating order books

What are some standard simple ways of simulating an order book? I have found this paper, but it is missing the implementation details. And more importantly, it appears that it ignores the size of the ...
2 votes
0 answers
182 views

Competitive levels in Limit Order Books

I've been doing some research on electronic Limit Order Books (mainly equities) and I was wondering if anyone has seen a paper on how to compute competitive limit order prices. By competitive, I mean ...
2 votes
1 answer
175 views

Queue Reactive Model for large spread assets

Im working on the implementation of the Queue Reactive Model by Lehalle (https://arxiv.org/pdf/1312.0563.pdf), but I have encountered some implementation problems for my specific assets. First, the ...
1 vote
1 answer
351 views

How does one calibrate lambda in a Avellaneda-Stoikov market making problem leading to Gueant-Lehalle-Tapia model?

The title is similar to that of the question I was referred to here which has been answered by Lehalle himself! I'm trying to implement the Gueant-Lehalle-Tapia model which is how I got to this answer ...
0 votes
0 answers
71 views

Non-zero real-valued function continuous and piecewise $C^1$ that vanishes outside (0,1) with piecewise Lipschitz derivative

In this paper the authors to overcome the presence of microstructure noise which "contaminates" the ito-semimartingale in high-frequency data uses the idea of pre-averaging. For an ...
1 vote
1 answer
330 views

Trade Impulse signal

https://blog.headlandstech.com/2017/08/03/quantitative-trading-summary/ In reference to the link, under Market Microstructure Signals, the so called "Trade Impulse" signal was mentioned . ...
1 vote
1 answer
301 views

Multi level micro price

Typical micro price formula uses the top of book depth (i.e. level 1 depth): Microprice = (BidSize x AskPrice + AskSize x BidPrice) / (BidSize + AskSize) But how does one actually include more depth ...
3 votes
1 answer
408 views

Cleaning of high-frequency data

In the paper "Realized kernels in practice: trades and quotes" by O. E.Bandorff-Nielsen etc. cf. https://onlinelibrary.wiley.com/doi/full/10.1111/j.1368-423X.2008.00275.x in the section ...
3 votes
0 answers
156 views

Models for tick-by-tick / high-frequency data

I've spoken to one or two persons at some market making shops, and I'm under the impression that for modelling tick data, aside from the rise of ML, a pure jump process such as the variance gamma ...
18 votes
3 answers
6k views

Papers about risk management in algorithmic trading?

I am currently doing my research for my master thesis, which will clearly focus on the question of risk managment in algorithmic trading systems. I have done research about this topic and found some ...
0 votes
0 answers
272 views

Is there a common way that level 2 and time & sales data are analyzed together?

Let's say that for a single asset, we have a data stream from which we receive both level 2 order book updates (price level/quantity updates) as well as time & sales updates (grouped recent trades)...
3 votes
1 answer
377 views

Target variables in high frequency trading [closed]

Given that we are a market taker (removing liquidity from the limit order book through market orders), what should we be trying to forecast? It seems like the most pertinent thing for us to forecast ...
0 votes
1 answer
387 views

How are order book and trade data consolidated/distilled into a more(?) tractable form for modeling?

Let's say that there's some asset traded on an exchange and that, for this asset, I have access to a snapshot of the limit order book (price level and quantity for bids and offers) and subsequent ...
2 votes
0 answers
123 views

Estimating Parameters of Optimal Posting Strategy from "Enhancing Trading Strategies with Order Book Signals"

I'm reading the paper “Enhancing Trading Strategies with Order Book Signals” by Cartea et al (2015). And I have the following questions: Assume that I empirically estimated $\lambda^{l}, \lambda^{\pm}...
1 vote
1 answer
628 views

Market Making constant volatility assumption

I have read a few papers on market making and all(nearly) assume that the stock follows a brownian motion with no drift and constant volatility.These assumptions seems un-intuitive to me because of ...
0 votes
0 answers
85 views

In grid trading, is a fixed price level grid equivalent to a dynamic grid?

I am trying a grid trading bot that shifts the grid around the current market price within a minimum and maximum price. I lack context on how such strategy compares with a fixed grid centered around a ...
3 votes
2 answers
297 views

Align volume bars for multivariate analysis

Looking at the book "Advances in financial machine learning" the author proposes a way to sample high frequency financial data in several fashions which are not only the standard time bars. I was ...
1 vote
1 answer
111 views

Faster Portfolio Optimization under rank 1 updates

I was studying Markowitz portfolio optimization and had a question on the practicality of this in the setting of high frequency trading. Optimization seems like a cumbersome process. But at each tick ...
3 votes
1 answer
483 views

High-frequency risk management methodologies

In a high-frequency environment, such as a proprietary trading firm or market making firm, the primary goal of the risk management team would be to limit potential losses, but how is that done in this ...
7 votes
2 answers
709 views

What are the main types of orders on an exchange?

I'm currently reading Michael Lewis' Flash Boys, which is about high-frequency trading. It was published in 2014 and it says that there are 150 types of orders on exchanges (mainly built for high-...
0 votes
1 answer
872 views

Micro Price vs multi-level micro price

Why do we use the micro price $$p_m = \frac{B_{\text{size}} A_{\text{price}} + A_{\text{size}} B_{\text{price}}}{ A_{\text{size}} + B_{\text{size}}}$$ rather than fixing $A_{\text{size}}$ and $B_{\...
5 votes
2 answers
1k views

Complexity of using balanced-tree to model order book

I have bene researching on the best data structure to implement a limit order book. Some of the most common implementations include arrays and balanced trees. This link has a good set of references. ...
2 votes
1 answer
357 views

How were High Frequency Traders able to front-run in this example from Flash Boys?

I am re-reading Michael Lewis' Flash Boys book, and I have a question about how a High Frequency Trader was able to front-run an order in a particular example mentioned in the book. On page 78, ...
10 votes
5 answers
7k views

What is C++ used for when writing code at High Frequency Trading firms?

Okay. This might be a pretty dumb question, but I really want to know what is it that the high frequency trading firms write in terms of services that requires C++. Background I am a Rust and ...
2 votes
1 answer
324 views

Constructing a mid using signals from another asset

When delta-neutral market making it is important to construct a mid price. Often the mid price of the asset you are trading is influenced by another (correlated) asset. What methodologies would you ...
0 votes
1 answer
187 views

Execution Strategies

I have a rather broad question. Not sure how to best put it. Does anyone have any papers/resources on how to improve the execution model of any strategy? Would it be different if strategy under ...
26 votes
3 answers
5k views

How to forecast volatility using high-frequency data?

There is a large literature covering volatility forecasts with high-frequency tick data. Much of this has surrounded the concept of "realized volatility", such as: "Realized Volatility and ...
2 votes
1 answer
1k views

What are the parameters’ units in the Avellaneda and Stoikov model?

I'm studying a draft of the paper “Dealing with the Inventory Risk: A solution to the market making problem” by Guéant et al from July 2012. According to the paper, the closed form solution to the ...
20 votes
3 answers
16k views

Avellaneda -Stoikov market making model

I am reading paper High-frequency trading in a limit order book by Marco Avellaneda and Sasha Stoikov. At the end of the paper they obtain a closed-form solution to the optimal market-maker quotes ...
0 votes
1 answer
737 views

crypto HFT architecture

This architecture is designed to minimize latency with the help of busy-spinning and CPU affinity locks(meaning each producer/consumer thread running in only one core), preventing a thread from ...
4 votes
1 answer
734 views

Daily realized volatility and true daily volatility

Can someone help if I am thinking correctly? If $R(t,i)$ is the i'th log-return for $i = 1\ldots,M$ of day $t$ for $t = 1\ldots,T$. Can I assume that the daily realized volatility (denoted $RV(t)$) is ...
4 votes
0 answers
250 views

What is milliprice (it seems to be an extension of microprice) [closed]

For computing the expected future price (on a small time scale) one can use micro price which is defined here. The definition of micro-price is ...
1 vote
1 answer
516 views

Volume bars, dollar bars from low-frequency data?

Financial models by default use time bars of prices/returns for input data. I use time bars to refer to both intraday (high frequency) and interday (low frequency) data since the sampling occurs at ...
1 vote
0 answers
176 views

Privatelink latency impact

I am working with a team on a market making algorithm on Huobi. We are integrating our infrastructure in AWS and when you are a S tier you can get a privatelink which is about 10 to 50 ms faster than ...

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