Details

High-Frequency Trading


High-Frequency Trading

A Practical Guide to Algorithmic Strategies and Trading Systems
Wiley Trading 2. Aufl.

von: Irene Aldridge

54,99 €

Verlag: Wiley
Format: EPUB
Veröffentl.: 01.04.2013
ISBN/EAN: 9781118416822
Sprache: englisch
Anzahl Seiten: 320

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Beschreibungen

<b>A fully revised second edition of the best guide to high-frequency trading</b> <p>High-frequency trading is a difficult, but profitable, endeavor that can generate stable profits in various market conditions. But solid footing in both the theory and practice of this discipline are essential to success. Whether you're an institutional investor seeking a better understanding of high-frequency operations or an individual investor looking for a new way to trade, this book has what you need to make the most of your time in today's dynamic markets.</p> <p>Building on the success of the original edition, the <i>Second Edition</i> of <i>High-Frequency Trading</i> incorporates the latest research and questions that have come to light since the publication of the first edition. It skillfully covers everything from new portfolio management techniques for high-frequency trading and the latest technological developments enabling HFT to updated risk management strategies and how to safeguard information and order flow in both dark and light markets.</p> <ul> <li>Includes numerous quantitative trading strategies and tools for building a high-frequency trading system</li> <li>Address the most essential aspects of high-frequency trading, from formulation of ideas to performance evaluation</li> <li>The book also includes a companion Website where selected sample trading strategies can be downloaded and tested</li> <li>Written by respected industry expert Irene Aldridge</li> </ul> <p>While interest in high-frequency trading continues to grow, little has been published to help investors understand and implement this approach—until now. This book has everything you need to gain a firm grip on how high-frequency trading works and what it takes to apply it to your everyday trading endeavors.</p>
<p>Preface xi</p> <p>Acknowledgments xiii</p> <p><b>Chapter 1 How Modern Markets Differ from Those Past 1</b></p> <p>Media, Modern Markets, and HFT 6</p> <p>HFT as Evolution of Trading Methodology 7</p> <p>What Is High-Frequency Trading? 13</p> <p>What Do High-Frequency Traders Do? 15</p> <p>How Many High-Frequency Traders Are There? 17</p> <p>Major Players in the HFT Space 17</p> <p>Organization of This Book 18</p> <p>Summary 18</p> <p>End-of-Chapter Questions 19</p> <p><b>Chapter 2 Technological Innovations, Systems, and HFT 21</b></p> <p>A Brief History of Hardware 21</p> <p>Messaging 25</p> <p>Software 33</p> <p>Summary 35</p> <p>End-of-Chapter Questions 35</p> <p><b>Chapter 3 Market Microstructure, Orders, and Limit Order Books 37</b></p> <p>Types of Markets 37</p> <p>Limit Order Books 39</p> <p>Aggressive versus Passive Execution 43</p> <p>Complex Orders 44</p> <p>Trading Hours 45</p> <p>Modern Microstructure: Market Convergence and Divergence 46</p> <p>Fragmentation in Equities 46</p> <p>Fragmentation in Futures 50</p> <p>Fragmentation in Options 51</p> <p>Fragmentation in Forex 51</p> <p>Fragmentation in Fixed Income 51</p> <p>Fragmentation in Swaps 51</p> <p>Summary 52</p> <p>End-of-Chapter Questions 52</p> <p><b>Chapter 4 High-Frequency Data 53</b></p> <p>What Is High-Frequency Data? 53</p> <p>How Is High-Frequency Data Recorded? 54</p> <p>Properties of High-Frequency Data 56</p> <p>High-Frequency Data Are Voluminous 57</p> <p>High-Frequency Data Are Subject to the Bid-Ask Bounce 59</p> <p>High-Frequency Data Are Not Normal or Lognormal 62</p> <p>High-Frequency Data Are Irregularly Spaced in Time 62</p> <p>Most High-Frequency Data Do Not Contain Buy-and-Sell Identifiers 70</p> <p>Summary 73</p> <p>End-of-Chapter Questions 74</p> <p><b>Chapter 5 Trading Costs 75</b></p> <p>Overview of Execution Costs 75</p> <p>Transparent Execution Costs 76</p> <p>Implicit Execution Costs 78</p> <p>Background and Definitions 82</p> <p>Estimation of Market Impact 85</p> <p>Empirical Estimation of Permanent Market Impact 88</p> <p>Summary 96</p> <p>End-of-Chapter Questions 96</p> <p><b>Chapter 6 Performance and Capacity of High-Frequency Trading Strategies 97</b></p> <p>Principles of Performance Measurement 97</p> <p>Basic Performance Measures 98</p> <p>Comparative Ratios 106</p> <p>Performance Attribution 110</p> <p>Capacity Evaluation 112</p> <p>Alpha Decay 116</p> <p>Summary 116</p> <p>End-of-Chapter Questions 116</p> <p><b>Chapter 7 The Business of High-Frequency Trading 117</b></p> <p>Key Processes of HFT 117</p> <p>Financial Markets Suitable for HFT 121</p> <p>Economics of HFT 122</p> <p>Market Participants 129</p> <p>Summary 130</p> <p>End-of-Chapter Questions 130</p> <p><b>Chapter 8 Statistical Arbitrage Strategies 131</b></p> <p>Practical Applications of Statistical Arbitrage 133</p> <p>Summary 144</p> <p>End-of-Chapter Questions 144</p> <p><b>Chapter 9 Directional Trading Around Events 147</b></p> <p>Developing Directional Event-Based Strategies 148</p> <p>What Constitutes an Event? 149</p> <p>Forecasting Methodologies 150</p> <p>Tradable News 153</p> <p>Application of Event Arbitrage 155</p> <p>Summary 163</p> <p>End-of-Chapter Questions 163</p> <p><b>Chapter 10 Automated Market Making—Naïve Inventory Models 165</b></p> <p>Introduction 165</p> <p>Market Making: Key Principles 167</p> <p>Simulating a Market-Making Strategy 167</p> <p>Naïve Market-Making Strategies 168</p> <p>Market Making as a Service 173</p> <p>Profitable Market Making 176</p> <p>Summary 178</p> <p>End-of-Chapter Questions 178</p> <p><b>Chapter 11 Automated Market Making II 179</b></p> <p>What’s in the Data? 179</p> <p>Modeling Information in Order Flow 182</p> <p>Summary 193</p> <p>End-of-Chapter Questions 193</p> <p><b>Chapter 12 Additional HFT Strategies, Market Manipulation, and Market Crashes 195</b></p> <p>Latency Arbitrage 196</p> <p>Spread Scalping 197</p> <p>Rebate Capture 198</p> <p>Quote Matching 199</p> <p>Layering 200</p> <p>Ignition 201</p> <p>Pinging/Sniping/Sniffing/Phishing 201</p> <p>Quote Stuffing 201</p> <p>Spoofing 202</p> <p>Pump-and-Dump 202</p> <p>Machine Learning 207</p> <p>Summary 208</p> <p>End-of-Chapter Questions 208</p> <p><b>Chapter 13 Regulation 209</b></p> <p>Key Initiatives of Regulators Worldwide 209</p> <p>Summary 222</p> <p>End-of-Chapter Questions 223</p> <p><b>Chapter 14 Risk Management of HFT225</b></p> <p>Measuring HFT Risk 225</p> <p>Summary 244</p> <p>End-of-Chapter Questions 244</p> <p><b>Chapter 15 Minimizing Market Impact 245</b></p> <p>Why Execution Algorithms? 245</p> <p>Order-Routing Algorithms 247</p> <p>Issues with Basic Models 258</p> <p>Advanced Models 262</p> <p>Practical Implementation of Optimal Execution Strategies 269</p> <p>Summary 269</p> <p>End-of-Chapter Questions 270</p> <p><b>Chapter 16 Implementation of HFT Systems 271</b></p> <p>Model Development Life Cycle 271</p> <p>System Implementation 273</p> <p>Testing Trading Systems 283</p> <p>Summary 286</p> <p>End-of-Chapter Questions 287</p> <p>About the Author 288</p> <p>About the Web Site 290</p> <p>References 291</p> <p>Index 303</p>
<p><b>IRENE ALDRIDGE</b> is an investment consultant, portfolio manager, a recognized expert on the subjects of quantitative investing and high-frequency trading, and a seasoned educator. She is currently Industry Professor at New York University, Department of Finance and Risk Engineering, Polytechnic Institute, as well as Managing Partner and Quantitative Portfolio Manager at Able Alpha Trading Ltd., an investment consulting firm and a proprietary trading vehicle specializing in quantitative and high-frequency trading strategies. Aldridge is also a founder of AbleMarkets.com, an online resource making the latest high-frequency research for institutional investors and broker-dealers. Aldridge holds an MBA from INSEAD, an MS in financial engineering from Columbia University, a BE in electric engineering from the Cooper Union in New York, and is in the process of completing her PhD at New York University. She is a frequent speaker at top industry events and a contributor to academic, practitioner, and mainstream media publications, including the <i>Journal of Trading</i>, <i>Futures</i> magazine, Reuters HedgeWorld, Advanced Trading, <i>FX Week</i>, <i>FINalternatives</i>, <i>Dealing With Technology</i>, and <i>Huffington Post</i>.
<p><b>HIGH-FREQUENCY TRADING</b> <p><b>SECOND EDITION</b> <p>Since its inception in the early 1980s, high-frequency trading (HFT) has continued to evolve and grow. While some have tried to demonize it over the past few years, the fact is that HFT has delivered considerable operational improvements to the markets—most of which have resulted in lower volatility, higher market stability, better market transparency, and lower execution costs for traders and investors. <p>While "geeks" often claim HFT as their domain, <i>anyone</i> can integrate this proven approach into their trading endeavors. With minimal investment required, the barriers for entry into this field have never been lower, and the opportunity to generate significant profits has never been greater. Nobody understands this better than industry expert Irene Aldridge. And now, with the <i>Second Edition</i> of <i>High-Frequency Trading,</i> she returns to share her experience in this arena with you. <p>Building on the success of the first edition, this reliable resource incorporates the latest—yet applied and ready-to-implement—information on this essential trading approach. It also includes challenging end-of-chapter questions to test your command of the topics covered. Along the way, it: <ul> <li>Describes the technological evolution that has enabled algorithmic and HFT, and lays the foundation of analysis via descriptions of modern market microstructure, high-frequency data, and trading costs</li> <li>Delves into the economics of HFT, exploring the methodologies for evaluating the performance and capacity of HFT strategies, and outlining the actual business of HFT</li> <li>Addresses the actual implementation of HFT by detailing the core models of today's HFT strategies, from statistical arbitrage and directional event-based trading to automated market making and liquidity detection</li> <li>Examines the real risks inherent in many HFT strategies and the ways to mitigate or minimize them</li> <li>Discusses modern legislation relevant to HFT, traditional and current approaches, and likely imminent directions</li> </ul> <p><i>High-Frequency Trading, Second Edition</i> is also accompanied by a website that supplements the material found in this book. It includes customizable teaching slides, basic C/C++ code for estimating regression coefficients, a sample of tick data, and much more. <p>In order to effectively trade in today's markets, you need to quickly adapt to the shifting market landscape. <i>High-Frequency Trading, Second Edition</i> will put you in a better position to achieve this elusive goal and allow you to profit from it in the process.

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