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A Study Of Intraday Volatility Trading Utilizing High Frequency Data And The Microstructure Effects On Implementation
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Book Synopsis A Study of Intraday Volatility Trading Utilizing High Frequency Data and the Microstructure Effects on Implementation by : Jennifer Wells Murray
Download or read book A Study of Intraday Volatility Trading Utilizing High Frequency Data and the Microstructure Effects on Implementation written by Jennifer Wells Murray and published by . This book was released on 2010 with total page 214 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Testing for Market Microstructure Effects in Intraday Volatility by : Torben Gustav Andersen
Download or read book Testing for Market Microstructure Effects in Intraday Volatility written by Torben Gustav Andersen and published by . This book was released on 1998 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops mew robust inference procedures for analyzing the intraday return volatility patterns that constitute a focal point of much market microstructure theory. Our empirical analysis is motivated by the recent lifting of trading restrictions in the interbank foreign exchange (FX) market for Japanese banks during the Tokyo lunch period. Ito, Lyons, and Melvin (1998) (ILM) argue that this deregulation resulted in a highly significant shift in the volatility pattern across the entire Japanese trading day, indicating that private information is an important component of the price formation process in the FX market. In contrast, our robust analysis finds no evidence for any discernible change in the pattern outside of the Tokyo lunch period. Moreover, we document that the standard variance-ratio methodology inference in this high-frequency data context.
Book Synopsis Analysing Intraday Implied Volatility for Pricing Currency Options by : Thi Le
Download or read book Analysing Intraday Implied Volatility for Pricing Currency Options written by Thi Le and published by Springer Nature. This book was released on 2021-04-13 with total page 350 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book focuses on the impact of high-frequency data in forecasting market volatility and options price. New technologies have created opportunities to obtain better, faster, and more efficient datasets to explore financial market phenomena at the most acceptable data levels. It provides reliable intraday data supporting financial investment decisions across different assets classes and instruments consisting of commodities, derivatives, equities, fixed income and foreign exchange. This book emphasises four key areas, (1) estimating intraday implied volatility using ultra-high frequency (5-minutes frequency) currency options to capture traders' trading behaviour, (2) computing realised volatility based on 5-minute frequency currency price to obtain speculators' speculation attitude, (3) examining the ability of implied volatility to subsume market information through forecasting realised volatility and (4) evaluating the predictive power of implied volatility for pricing currency options. This is a must-read for academics and professionals who want to improve their skills and outcomes in trading options.
Book Synopsis Testing for Market Microstructure Effects in Intraday Volatility by : Torben G. Andersen
Download or read book Testing for Market Microstructure Effects in Intraday Volatility written by Torben G. Andersen and published by . This book was released on 2010 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops mew robust inference procedures for analyzing the intraday return volatility patterns that constitute a focal point of much market microstructure theory. Our empirical analysis is motivated by the recent lifting of trading restrictions in the interbank foreign exchange (FX) market for Japanese banks during the Tokyo lunch period. Ito, Lyons, and Melvin (1998) (ILM) argue that this deregulation resulted in a highly significant shift in the volatility pattern across the entire Japanese trading day, indicating that private information is an important component of the price formation process in the FX market. In contrast, our robust analysis finds no evidence for any discernible change in the pattern outside of the Tokyo lunch period. Moreover, we document that the standard variance-ratio methodology inference in this high-frequency data context.
Book Synopsis High Frequency Trading and Limit Order Book Dynamics by : Ingmar Nolte
Download or read book High Frequency Trading and Limit Order Book Dynamics written by Ingmar Nolte and published by Routledge. This book was released on 2016-04-14 with total page 325 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book brings together the latest research in the areas of market microstructure and high-frequency finance along with new econometric methods to address critical practical issues in these areas of research. Thirteen chapters, each of which makes a valuable and significant contribution to the existing literature have been brought together, spanning a wide range of topics including information asymmetry and the information content in limit order books, high-frequency return distribution models, multivariate volatility forecasting, analysis of individual trading behaviour, the analysis of liquidity, price discovery across markets, market microstructure models and the information content of order flow. These issues are central both to the rapidly expanding practice of high frequency trading in financial markets and to the further development of the academic literature in this area. The volume will therefore be of immediate interest to practitioners and academics. This book was originally published as a special issue of European Journal of Finance.
Book Synopsis High-Frequency Volatility Estimation and the Relative Importance of Market Microstructure Variables by : Yifan Li
Download or read book High-Frequency Volatility Estimation and the Relative Importance of Market Microstructure Variables written by Yifan Li and published by . This book was released on 2018 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we examine the relative importance of trading volume, bid-ask spread, order flow, order imbalance, total quote depth, quote depth difference and trading intensity for high-frequency volatility estimation. By using a best subset regression approach, we fi nd that contemporaneous trading intensity and order flow contains the most important information about volatility estimation in general, but the rankings of the importance of the market microstructure (MMS) variables vary between securities. Using a Lognormal Log-Autoregressive Conditional Duration (LL-ACD) model, we show that the inclusion of MMS covariates signi ffcantly improves the goodness-of- fit of the model. Furthermore, we show that the inclusion of MMS covariates in the LL-ACD model leads to substantial improvements in the quality of volatility estimates, both on a daily and an intraday level.
Book Synopsis The Impact of High-Frequency Trading on Volatility. Evidence from the Italian Market by : Valeria Caivano
Download or read book The Impact of High-Frequency Trading on Volatility. Evidence from the Italian Market written by Valeria Caivano and published by . This book was released on 2015 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The huge increase of HFT activity in recent years has posed the crucial question of whether it is beneficial for financial markets to both researchers and regulators. Recent academic research has studied the impact of HFT on different measures of market quality, such as liquidity, transaction costs, market integrity and efficiency, though the results are sometimes non conclusive. This study focuses on the impact of HFT on stock price volatility over the period 2011-2013 for a sample of 35 blue chips traded on Borsa Italiana. High frequency traders (HFTrs) are identified according to two methods. The first one, based on public information on the trading strategies of market participants, led us to identify 14 traders (so called 'pure' HFT firms). The second one includes the main investment banks active in the European markets, since they carry out some proprietary trading which could take the form of HFT (as stemming from the evidence reported in ESMA, 2014). These approaches allow the identification of a lower and upper bound for the actual share of HFT on total trading volume. Potential endogeneity of HFT is controlled through an instrumental variable approach, using as an instrument the introduction of a new trading platform that eased the HFT activity by decreasing the latency. Results show that an exogenous increase of HFT activity causes a statistically and economically significant increase in volatility. In details, an increase by one standard deviation of HFT activity carried out by 'pure' HFT firms raises volatility by an amount between 0.5 and 0.8 standard deviations. This means that, if HFT activity increases by 10 percentage points the annualized intraday volatility increases by an amount between 4 and 6 percentage points depending on the specification used. If we also take into account the activity carried out by investment banks the impact of an increase by 10 percentage points of HFT activity leads to an increase of annualized volatility by an amount between 3 and 5 percentage points. This paper adds to the existing literature by providing new empirical evidence from the Italian market. Furthermore, it contributes to the policy debate, which had recently led the European regulators to introduce new rules aimed at mitigating possible negative effects of HFT.
Book Synopsis Volatility Trading Strategies Using High-Frequency Data by : Yves Korolnik
Download or read book Volatility Trading Strategies Using High-Frequency Data written by Yves Korolnik and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis is an empirical research study, where high-frequency volatility information of the front month Brent Future from 1996 to 2017 is analyzed and translated into trading strategies. The trading strategies are based on the volatility variable RV. The nature of this RV variables distribution and time series is analyzed in Eviews econometric software for sources of possibly profitable trading strategies, which are backtested in MS Excel 2018 over an in-sample and out-of-sample period.Since the RV variable is based on historic volatility information, the HAR-RV model was used to obtain RV forecasts for the next trading day(s), which were utilized in trading strategies. All trading strategies tested in this thesis were benchmarked against a simple buy-and-hold strategy, as well as tested with two-tailed t-tests to reject the null hypothesis of zero average long-term returns.
Book Synopsis Essays in Financial Econometrics by : Christian Nguenang Kapnang
Download or read book Essays in Financial Econometrics written by Christian Nguenang Kapnang and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Institutional changes in markets regulation in recent years have enhanced the multiplication of markets and the cross listing of assets simultaneously in many places. The prices for a security on those interrelated markets are strongly linked by arbitrage activities. This is also the case for one security and its derivatives: Cash and futures, CDS and Credit spread, spot and options. In those multiple markets settings, it is interesting for regulators, investors and academia to understand and measure how each market contributes to the dynamic of the common fundamental value. At the same time, improvement in ITC fueled trading activity and generated High frequency data. My thesis develops new frameworks, with respect to the data frequency, to measure the contribution of each market to the formation of prices (Price discovery) and to the formation of volatility (Volatility discovery). In the first chapter, I show that existing metrics of price discovery lead to misleading conclusions when using High-frequency data. Due to uninformative microstructure noises, they confuse speed and noise dimension of information processing. I then propose robust-to-noise metrics, that are good at detecting “which market is fast”, and produce tighten bounds. Using Monte Carlo simulations and Dow Jones stocks traded on NYSE and NASDAQ, I show that the data are in line with my theoretical conclusions. In the second chapter, I propose a new way to define price adjustment by building an Impulse Response measuring the permanent impact of market's innovation and I give its asymptotic distribution. The framework innovates in providing testable results for price discovery measures based on innovation variance. I later present an equilibrium model of different maturities futures markets and show that it supports my metric: As the theory suggests, the measure selects the market with the higher number of participants as dominating the price discovery. An application on some metals of the London Metal Exchange shows that 3-month futures contract dominates the spot and the 15-month in price formation. The third chapter builds a continuous time comprehensive framework for Price discovery measures with High Frequency data, as the literature exists only in a discrete time. It also has advantages on the literature in that it explicitly deals with non-informative microstructure noises and accommodates a stochastic volatility. We derive a measure of price discovery evaluating the permanent impact of a shock on a market's innovation. Empirics show that it has good properties. In the fourth chapter, I develop a framework to study the contribution to the volatility of common volatility. This allows answering questions such as: Does volatility of futures markets dominate volatility of the Cash market in the formation of permanent volatility? I build a VECM with Autoregressive Stochastic Volatility estimated by MCMC method and Bayesian inference. I show that not only prices are cointegrated, their conditional volatilities also share a permanent factor at the daily and intraday level. I derive measures of market's contribution to Volatility discovery. In the application on metals and EuroStoxx50 futures, I find that for most of the securities, while price discovery happens on the cash market, the volatility discovery happens in the Futures market. Lastly, I build a framework that exploits High frequency data and avoid computational burden of MCMC. I show that Realized Volatilities are driven by a common component and I compute contribution of NYSE and NASDAQ to permanent volatility of some Dow Jones stocks. I obtain that volatility of the volume is the best determinant of volatility discovery, but low figures suggest others important factors.
Book Synopsis Handbook of Fixed-Income Securities by : Pietro Veronesi
Download or read book Handbook of Fixed-Income Securities written by Pietro Veronesi and published by John Wiley & Sons. This book was released on 2016-04-04 with total page 630 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive guide to the current theories and methodologies intrinsic to fixed-income securities Written by well-known experts from a cross section of academia and finance, Handbook of Fixed-Income Securities features a compilation of the most up-to-date fixed-income securities techniques and methods. The book presents crucial topics of fixed income in an accessible and logical format. Emphasizing empirical research and real-life applications, the book explores a wide range of topics from the risk and return of fixed-income investments, to the impact of monetary policy on interest rates, to the post-crisis new regulatory landscape. Well organized to cover critical topics in fixed income, Handbook of Fixed-Income Securities is divided into eight main sections that feature: • An introduction to fixed-income markets such as Treasury bonds, inflation-protected securities, money markets, mortgage-backed securities, and the basic analytics that characterize them • Monetary policy and fixed-income markets, which highlight the recent empirical evidence on the central banks’ influence on interest rates, including the recent quantitative easing experiments • Interest rate risk measurement and management with a special focus on the most recent techniques and methodologies for asset-liability management under regulatory constraints • The predictability of bond returns with a critical discussion of the empirical evidence on time-varying bond risk premia, both in the United States and abroad, and their sources, such as liquidity and volatility • Advanced topics, with a focus on the most recent research on term structure models and econometrics, the dynamics of bond illiquidity, and the puzzling dynamics of stocks and bonds • Derivatives markets, including a detailed discussion of the new regulatory landscape after the financial crisis and an introduction to no-arbitrage derivatives pricing • Further topics on derivatives pricing that cover modern valuation techniques, such as Monte Carlo simulations, volatility surfaces, and no-arbitrage pricing with regulatory constraints • Corporate and sovereign bonds with a detailed discussion of the tools required to analyze default risk, the relevant empirical evidence, and a special focus on the recent sovereign crises A complete reference for practitioners in the fields of finance, business, applied statistics, econometrics, and engineering, Handbook of Fixed-Income Securities is also a useful supplementary textbook for graduate and MBA-level courses on fixed-income securities, risk management, volatility, bonds, derivatives, and financial markets. Pietro Veronesi, PhD, is Roman Family Professor of Finance at the University of Chicago Booth School of Business, where he teaches Masters and PhD-level courses in fixed income, risk management, and asset pricing. Published in leading academic journals and honored by numerous awards, his research focuses on stock and bond valuation, return predictability, bubbles and crashes, and the relation between asset prices and government policies.
Book Synopsis Algorithmic and High-Frequency Trading by : Álvaro Cartea
Download or read book Algorithmic and High-Frequency Trading written by Álvaro Cartea and published by Cambridge University Press. This book was released on 2015-08-06 with total page 360 pages. Available in PDF, EPUB and Kindle. Book excerpt: The design of trading algorithms requires sophisticated mathematical models backed up by reliable data. In this textbook, the authors develop models for algorithmic trading in contexts such as executing large orders, market making, targeting VWAP and other schedules, trading pairs or collection of assets, and executing in dark pools. These models are grounded on how the exchanges work, whether the algorithm is trading with better informed traders (adverse selection), and the type of information available to market participants at both ultra-high and low frequency. Algorithmic and High-Frequency Trading is the first book that combines sophisticated mathematical modelling, empirical facts and financial economics, taking the reader from basic ideas to cutting-edge research and practice. If you need to understand how modern electronic markets operate, what information provides a trading edge, and how other market participants may affect the profitability of the algorithms, then this is the book for you.
Book Synopsis Handbook of High-Frequency Trading and Modeling in Finance by : Ionut Florescu
Download or read book Handbook of High-Frequency Trading and Modeling in Finance written by Ionut Florescu and published by John Wiley & Sons. This book was released on 2016-04-25 with total page 452 pages. Available in PDF, EPUB and Kindle. Book excerpt: Reflecting the fast pace and ever-evolving nature of the financial industry, the Handbook of High-Frequency Trading and Modeling in Finance details how high-frequency analysis presents new systematic approaches to implementing quantitative activities with high-frequency financial data. Introducing new and established mathematical foundations necessary to analyze realistic market models and scenarios, the handbook begins with a presentation of the dynamics and complexity of futures and derivatives markets as well as a portfolio optimization problem using quantum computers. Subsequently, the handbook addresses estimating complex model parameters using high-frequency data. Finally, the handbook focuses on the links between models used in financial markets and models used in other research areas such as geophysics, fossil records, and earthquake studies. The Handbook of High-Frequency Trading and Modeling in Finance also features: • Contributions by well-known experts within the academic, industrial, and regulatory fields • A well-structured outline on the various data analysis methodologies used to identify new trading opportunities • Newly emerging quantitative tools that address growing concerns relating to high-frequency data such as stochastic volatility and volatility tracking; stochastic jump processes for limit-order books and broader market indicators; and options markets • Practical applications using real-world data to help readers better understand the presented material The Handbook of High-Frequency Trading and Modeling in Finance is an excellent reference for professionals in the fields of business, applied statistics, econometrics, and financial engineering. The handbook is also a good supplement for graduate and MBA-level courses on quantitative finance, volatility, and financial econometrics. Ionut Florescu, PhD, is Research Associate Professor in Financial Engineering and Director of the Hanlon Financial Systems Laboratory at Stevens Institute of Technology. His research interests include stochastic volatility, stochastic partial differential equations, Monte Carlo Methods, and numerical methods for stochastic processes. Dr. Florescu is the author of Probability and Stochastic Processes, the coauthor of Handbook of Probability, and the coeditor of Handbook of Modeling High-Frequency Data in Finance, all published by Wiley. Maria C. Mariani, PhD, is Shigeko K. Chan Distinguished Professor in Mathematical Sciences and Chair of the Department of Mathematical Sciences at The University of Texas at El Paso. Her research interests include mathematical finance, applied mathematics, geophysics, nonlinear and stochastic partial differential equations and numerical methods. Dr. Mariani is the coeditor of Handbook of Modeling High-Frequency Data in Finance, also published by Wiley. H. Eugene Stanley, PhD, is William Fairfield Warren Distinguished Professor at Boston University. Stanley is one of the key founders of the new interdisciplinary field of econophysics, and has an ISI Hirsch index H=128 based on more than 1200 papers. In 2004 he was elected to the National Academy of Sciences. Frederi G. Viens, PhD, is Professor of Statistics and Mathematics and Director of the Computational Finance Program at Purdue University. He holds more than two dozen local, regional, and national awards and he travels extensively on a world-wide basis to deliver lectures on his research interests, which range from quantitative finance to climate science and agricultural economics. A Fellow of the Institute of Mathematics Statistics, Dr. Viens is the coeditor of Handbook of Modeling High-Frequency Data in Finance, also published by Wiley.
Book Synopsis Volatility at High Frequency by : Duke Whang
Download or read book Volatility at High Frequency written by Duke Whang and published by . This book was released on 2012 with total page 96 pages. Available in PDF, EPUB and Kindle. Book excerpt: The availability of software tools, high frequency data, and recent advances in statistical inference all allow a greater study of continuous-time models of price and volatility processes. This research studies the structure of intraday stock volatility over a selected group of stocks from 2007 to 2011. We use nearly every valid transaction in the Trades and Quotes database to obtain a price series which is sampled every second. We calculate realized variation (RV), the sum of squared log returns, to estimate squared volatility. We partition the trading day at the level of 100-second time intervals, and we observe mean reversion in RV even at this time scale. We estimate a modified Heston model for RV in which statistical criteria are used to detect volatility jumps.
Book Synopsis Public Information Arrival and Volatility of Intraday Stock Returns by : Petko S. Kalev
Download or read book Public Information Arrival and Volatility of Intraday Stock Returns written by Petko S. Kalev and published by . This book was released on 2014 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study employs firm-specific announcements as a proxy for information flows and investigates the information-volatility relation using high-frequency data from the Australian Stock Exchange. Our analysis reveals a positive and significant impact of the arrival rate of the selected news variable on the conditional variance of stock returns, even after controlling for the potential effects of trading volume and high opening volatility. Furthermore, the inclusion of the news variable in the conditional variance equation of the generalized autoregressive conditional heteroscedastic model also reduces volatility persistence, especially with intraday data. Combined with the evidence that news arrivals display a very strong pattern of autocorrelation, our results are consistent with the Mixture of Distribution Hypothesis, which attributes conditional heteroscedasticity of stock returns to time-dependence in the news arrival process.
Book Synopsis High-frequency Trading by : David Easley
Download or read book High-frequency Trading written by David Easley and published by . This book was released on 2013-09-30 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Handbook of Price Impact Modeling by : Kevin T Webster
Download or read book Handbook of Price Impact Modeling written by Kevin T Webster and published by CRC Press. This book was released on 2023-05-05 with total page 433 pages. Available in PDF, EPUB and Kindle. Book excerpt: Builds a market simulator to back test trading algorithms Implements closed-form strategies that optimize trading signals Measures liquidity risk and stress test portfolios for fire sales Analyze algorithms’ performance controlling for common trading biases Estimates price impact models using the public trading tape
Book Synopsis The Impact of Futures Trading on Intraday Spot Volatility and Liquidity by : Shimeng Shi
Download or read book The Impact of Futures Trading on Intraday Spot Volatility and Liquidity written by Shimeng Shi and published by . This book was released on 2018 with total page 15 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study uses high-frequency data to examine the impact of Bitcoin futures trading on volatility and liquidity of the Bitcoin spot market. The introduction of futures trading significantly reduces the spot price variations. The spot market becomes more liquid in the post-futures trading period. The results are robust to different volatility and liquidity proxies. Hence, at least within a short period, Bitcoin futures trading plays a positive role in stabilising the spot price volatility and improving the spot market liquidity.
