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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44 views

Ultra high frequency TSRV

I'd like to verify my approach to calculate high-frequency RV estimator, as introduced in Ait-Sahalia, Myklad, Zhang 2011. After reading the paper a couple of times, it seems to me, that the only ...
1
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0answers
66 views

How to weigh computational cost of updating an online predictive model for latency-constrained trading (e.g., market making, HFT)?

Say one has a predictive online model for market making or HFT (or just for anything strictly latency-constrained). In my specific example, I start with a Gaussian distribution over the "true value" ...
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0answers
27 views

TSRV parameters selection

I'm thinking about how to select the $J$, and particularly, $K$ parameters for the Two Scale Realized Volatility estimation? I cannot find any reference for that in the original paper - there it says $...
2
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0answers
33 views

HAR-RV model for predicting 1-min volatility

I would like to use HAR-RV model (Heterogenous AutoRegressive - Realized Volatility) to predict a 1 minute realised volatility using the HAR model. As regressors I intend to use RV of previous minute, ...
3
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1answer
137 views

Should a high-frequency market-making fair value be a point or bid/offer pair?

A single micro-price (e.g., volume weighted mid adjusted for recent trades) is simpler and can be used for pricing both our bid and our offer. But a bid fair and an offer fair have the desirable ...
3
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1answer
103 views

model high frequency bitcoin volatility

I am trying to model volatility of 1-minute returns of BTC, but it seems to me that the data do not behave traditionally. I tried fitting GARCH, eGARCH with ARMA (1,1) or (2,0), but I am not confident ...
2
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0answers
37 views

how to model NGARCH using 5min frequency data?

NGARCH model using 5-min High-frequency data in R I wanted to analyze some 5 minute frequency data of stock market. My teacher asked me to use NGARCH to model, but I didn't know how to program.Here ...
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0answers
91 views

Modelling Order Flow

I am trying to model the number of order that come at a distance d from the top of the book on either side, both bid and ask. I was wondering what is a good way to model orders which improve the ...
0
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1answer
65 views

Why does an exchange (IEX) need connection to other exchanges (like information about average prices)?

I have read "flash boys". The author describes how the Royal Bank of Canada uses THOR and an own SIP against certain practices of flash traders. I understand why a bank or a broker can make beneficial ...
9
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3answers
6k views

What mathematical theory is required for high frequency trading?

I am an applied math postdoc and I have been presented with the option of leaving academia to work in high frequency trading. I wanted to get a feel for the field and the theory underlying it so I ...
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0answers
57 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 ...
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1answer
114 views

How to account for intraday seasonality in GARCH model?

I am using a GARCH(1,1) model to estimate volatility. I am using hourly data to do this (I have hourly data for 100 trading days). Besides removing the first hour (which represents the overnight ...
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0answers
246 views

Information Driven Bars (Advances in Financial Machine Learning)

My team and I are busy coding up a python implementation of the information driven bars (imbalance and run bars) mentioned in Chapter 2 of the text book Advances in Financial Machine Learning. There ...
5
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1answer
379 views

Avellaneda-Stoikov empirical estimation verification

The solution of the model contains constant: $k = \alpha K$, it relates to: (i) probability of getting a fill ($\alpha$) and (ii) market impact ($K$). Estimating (i). The author proposes that the ...
2
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0answers
262 views

Hidden Markov Models for Higher frequency trading

I'm curious if anyone can validate my train of thought here with the utility of Hidden Markov models for modeling things happening on higher frequency trading activity versus lower frequency, and in ...
2
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1answer
73 views

(R-studio) Incorporating overnight returns in high-frequency data

Turning here since I haven't been able to find any help online. I'm currently dealing with a high-frequency data set in R of some stock indicies and I'm currently trying to clean the data so that I ...
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0answers
35 views

Convert Continous Signal to Discrete

Suppose I have a continuous signal for a futures in HFT context. The signal is noisy and continuous. I have tried using moving averages of the signal to make sense of it and to be able to use it, but ...
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2answers
271 views

Predicting microstructure momentum in market making

If I have a market maker which is compelled to provide quotes on both sides of the market, I am exposed to risk of quadratic losses (vs my linear gains during normal operations) during times when the ...
2
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0answers
64 views

Trades vs Cancel orders

In case of designing high frequency algorithms, do people treat all changes in the mid price similarly. What I mean is, if there is a change in the mid price due to a trade or there is a change in ...
4
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0answers
187 views

The “Universal Model” by Justin Sirignano and Rama Cont

In the nicely written article https://arxiv.org/abs/1803.06917 by Justin Sirignano and Rama Cont, they explained that their model is universal and stationary. I am a bit confused about some questions. ...
2
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0answers
51 views

Best features and tools over a short time interval [closed]

For a short time interval, what are the features having the most impact on a stock price movement? In the same direction, what are the better tools to tell us the price movement tangent? As tools, I ...
4
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2answers
203 views

Can you use GARCH-MIDAS for intraday data?

I'm working on a project to forecast volatility and I'm using intraday data (1 min). I want to include exogenous variables to the model that have daily frequency. I was wondering if GARCH-MIDAS can be ...
1
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1answer
142 views

Algo trading execution simulation

Disclaimer: Brand new to high frequency algo trading. Background:I have tick-by-tick trade data for stock A and I have joined the price and volume data for each trade with the previous snapshot of ...
3
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2answers
221 views

definition of mid price in literature

In literature, the mid-price is often used along with the terms "fair value", "true value" among others. I take it alot of the times it means the same thing because the mid-price doesnt necessarily ...
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0answers
96 views

Trade sizing with market making and the volume of uninformed trades

I have a trend following market maker in a highly volatile market (XBTUSD) which makes its money from uninformed trades over a short time horizon. Sizing my bids/asks has always caused me to question ...
4
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4answers
425 views

Modelling HFT data

In the context of Market making, how important is recent trades? In general, would i be able to get away with just modelling the Limit Order Book (LOB) and the evolution of the LOB in order to ...
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2answers
78 views

Financial forecasting and Optimal order submission [closed]

For instance, If i have a model that can accurately forecast 3s ahead, would the trading logic be rather trivial? I have fit a series of distributions to L2 data and believe I have a fairly good grasp ...
3
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2answers
524 views

Technical Analysis in HFT

Has anyone here used technical analysis (think MACD, RSI) in HFT setting and can comment on the usage as an entry/exit signal? Best
3
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1answer
256 views

Crossing the spread as a ML signal

In the optic of high-frequency trading, most of the standard trading algorithms work on the principle of mid-price prediction or mid-price movement prediction. However a big drawback of this technique ...
-2
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1answer
119 views

Insoluble Enigma [closed]

I used many statistical tools, i.e. t-SNE, SVM, Neural Network, UMAP, PCA, with the reformatted full market depth data with timestamp each second. UMAP gave me the best data representation, but ...
5
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1answer
236 views

Limit order book cancellations

Is there any practical and academic interest in predicting which orders in a limit order book will be canceled? From a policy point of view are people interested in detecting potential spoofing ...
14
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2answers
1k views

Market impact, why square root?

The standard method of market impact is the square-root formula \begin{equation} \Delta P = c \cdot\sigma \cdot \sqrt{\frac{n}{\nu}} \end{equation} where $\Delta P$ is the price change from executing ...
3
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1answer
114 views

Inherent Limitations with Respect to HFT Hardware

I am attempting to compile some aspects of high frequency trading that pose issues to all players in the field i.e., things that cause problems regardless of how much money the firm has to spend on ...
6
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1answer
341 views

Infinite horizon agent in Avellaneda-Stoikov model

I am trying to understand the Avellaneda-Stoikov model for high frequency trading, in particular the optimizing agent with infinite horizon. The reservation ask/bid prices for such an agent are ...
0
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1answer
1k views

What are trade markouts?

I have experience in trading but mostly in lower frequency quantitative trading. I've moved into HFT research and someone the other day mentioned markouts. I couldn't find anything online explaining ...
4
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1answer
242 views

Finding parameters of a function for optimal market making with real data

I am reading this paper and trying to apply it with real data to do some simulations. I will use realtime order book & market order data that I will receive from the exchange. This is a sample ...
3
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1answer
126 views

Exchange Infrastructure

Is there any reference document on how the infrastructure at an exchange works? I know the implementation at different exchanges are different and there is no one size fits all. But is there any ...
0
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1answer
60 views

Is there any literature on how stock exchanges guarantee consistency?

How do we know that artificial shares of some stock aren't created (perhaps going untracked) on exchanges. After all being man made digital systems they are prone to errors. An example: Suppose a ...
4
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1answer
1k views

Market Making Strategy to Interact with IB API

I was thinking to connect a market making software to the Interactive Brokers API (see IB API), but it seems it is not the best solution as per the information provided by this question: Is the ...
2
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1answer
855 views

How to measure the Sharpe Ratio of a high frequency trading strategy?

The Sharpe Ratio is defined as Sharpe ratio = (Mean portfolio return − Risk-free rate)/Standard deviation of portfolio return. Unfortunately, this does not make ...
0
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2answers
130 views

Data for daily real interest rates

In a high frequency model i would like to add daily real interest rates (preferably short-term) as a variable. However, I cannot seem to find either daily CPI data, or daily real interest rates (...
2
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1answer
223 views

Understanding Forex HFT Arbitrage with different counter parties/ Brokers/ ECN

I came across this in a online lecture. But couldn't wrap my head around it. Lets say I have accounts with two brokers/ECN/STP. Now consider the following scenario for currency pair USD/JPY Broker1: ...
5
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1answer
651 views

Trading Strategy adapting to my trading frequency

We want to predict the direction towards which the price will change. In this work the term price is used to refer to the mid-price of a stock, which is defined as the mean between the best bid ...
0
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1answer
108 views

Find a reasonable h

The mid-price at time $t$ is denoted by $$p_t = \frac{s_t^{a,1} + s_t^{b,1}}{2}.$$ This mid-price can evolve in minimum increments of half a tick but is almost always observed to move at ...
3
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4answers
361 views

How frequently do market makers cancel orders?

It is modeled that a market maker will post a limit order for a period of time and will maintain that order until the set period of time expires, or the order is filled, and then he will provide a new ...
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0answers
357 views

Calculating realized volatility of high-frequency data

I am wondering how to calculate the realized volatility. Sources such as say that the realized volatility is the sum of squared log returns sampled at a given frequency. So using 30 minute frequency ...
7
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2answers
1k views

Backtesting Market Making Strategy or Microstructure Strategy

How does one backtest either a market making strategy or microstructure-based strategy? I'd imagine that one way would be to record order book states over time and then insert the orders, but it seems ...
2
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0answers
266 views

Strange trading data coming from bitstamp

Through researching order execution algorithms I came upon something rather strange. My dev team wrote a program that captures live bitcoin trades on bitstamp through the WebSocket API for a single ...
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1answer
254 views

Calculating intraday returns from imperfect data in R [closed]

The aim is to calculate minute returns in R. Given is minute price data in a tbl_df. A row was only added if there actually were trades. ...
2
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1answer
301 views

Best way to buy and sell large volumes of crypto

I had a few questions about how to properly execute a large order of crypto currency without moving the price much. I know a lot of funds employ a TWAP/VWAP algorithm to liquidate or purchase a large ...