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Description of High-Frequency Trading

A hands-on guide to the fast and ever-changing world of high-frequency, algorithmic trading Financial markets are undergoing rapid innovation due to the continuing proliferation of computer power and algorithms. These developments have created a new investment discipline called high-frequency trading. This book covers all aspects of high-frequency trading, from the business case and formulation of ideas through the development of trading systems to application of capital and subsequent performance evaluation. It also includes numerous quantitative trading strategies, with market microstructure, event arbitrage, and deviations arbitrage discussed in great detail.

- Contains the tools and techniques needed for building a high-frequency trading system
- Details the post-trade analysis process, including key performance benchmarks and trade quality evaluation
- Written by well-known industry professional Irene Aldridge

Interest in high-frequency trading has exploded over the past year. This book has what you need to gain a better understanding of how it works and what it takes to apply this approach to your trading endeavors.

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Title Information

ISBN:

9780470563762

Pages:

340 pages

Format:

Hardback

Product Code:

426513

Publisher:

John Wiley & Sons Ltd

Published:

12/01/2010

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About Irene Aldridge

Irene Aldridge is an expert on the subject of high-frequency trading. She is currently a Managing Partner and Quantitative Portfolio Manager at ABLE Alpha Trading, LTD, a proprietary trading vehicle specializing in high-frequency systematic trading strategies. Prior to ABLE Alpha, Aldridge worked for various institutions on Wall Street and in Toronto, including Goldman Sachs and CIBC. She also taught finance at the University of Toronto. She holds an MBA from INSEAD, an MS in financial engineering from Columbia University, and a BE in electric engineering from the Cooper Union in New York. Aldridge is a frequent speaker at top industry events and a contributor to academic and practitioner publications, including the Journal of Trading, E-Forex, HedgeWorld, FXWeek, FINalternatives, and Dealing with Technology. She also appears frequently on business television, including appearances on CNBC, Fox Business, and The Daily Show with Jon Stewart. Aldridge has been quoted by Bloomberg LP and other major business news outlets.

Contents of High-Frequency Trading

Foreword
Acknowledgments

1. Introduction
2. Evolution Of High Frequency Trading
Financial Markets And Technological Innovation
Evolution Of Trading Methodology

3. Overview Of The Business Of High-Frequency Trading
Comparison With Traditional Approaches To Trading
Market Participants
Operating Model
Economics
Capitalizing A Hft Business
Conclusion

4. Financial Markets Suitable For High Frequency Trading
Financial Markets And Their Suitability For High
Frequency Trading
Conclusion

5. Evaluating Performance Of High-Frequency Strategies
Basic Return Characteristics
Comparative Ratios
Performance Attribution
Other Considerations In Strategy Evaluation
Conclusion

6. Orders, Traders And Their Applicability To High-Frequency Trading
Order Types
Order Distributions
Conclusion

7. Market Inefficiency And Profit Opportunities At Different Frequencies
Predictability Of Price Moves At High Frequencies
Conclusion

8. Searching For High-Frequency Trading Opportunities
Statistical Properties Of Returns
Linear Econometric Models
Volatility Modeling
Nonlinear Models
Conclusion

9. Working With Tick Data
Properties Of Tick Data
Quantity And Quality Of Tick Data
Bid-Ask Spreads
Bid-Ask Bounce
Modeling Arrivals Of Tick Data
Applying Traditional Econometric Techniques To Tick Data
Conclusion

10. Trading On Market Microstructure Inventory Models
Overview Of Inventory Trading Strategies
Orders, Traders And Liquidity
Profitable Market Making
Directional Liquidity Provision
Conclusion

11. Trading On Market Microstructure Information Models
Measures Of Asymmetric Information
Information-Based Trading Models
Conclusion

12. Event Arbitrage
Developing Event Arbitrage Trading Strategies
What Constitutes An Event?
Forecasting Methodologies
Tradeable News
Application Of Event Arbitrage
Conclusion

13. Statistical Arbitrage In High Frequency Settings
Mathematical Foundations
Practical Applications Of Statistical Arbitrage
Conclusion

14. Creating And Managing Portfolios Of High-Frequency Strategies
Analytical Foundations Of Portfolio Optimization
Effective Portfolio Management Practices
Conclusion

15. Back-Testing Trading Models
Evaluating Point Forecasts
Evaluating Directional Forecasts
Conclusion

16. Implementing High-Frequency Trading Systems
Model Development Lifecycle
System Implementation
Testing Trading Systems
Conclusion

17. Risk Management
Determining Risk Management Goals
Measuring Risk
Managing Risk
Conclusion

18. Executing And Monitoring High-Frequency Trading
Executing High-Frequency Trading Systems
Monitoring High-Frequency Execution
Conclusion

19. Post-Trade Profitability Analysis
Post-Trade Cost Analysis
Post-Trade Performance Analysis

References
About The Author
Index