High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems

by Irene Aldridge

Overview

Praise for

High-Frequency Trading

"A well thought out, practical guide covering all aspects of high-frequency trading and of systematic trading in general. I recommend this book highly."
—Igor Tulchinsky, CEO, WorldQuant, LLC

"For traditional fundamental and technical analysts, Irene Aldridge's book has the effect a first read of quantum physics would have had on traditional Newtonian physicists: eye-opening, challenging, and enlightening."
—Neal M. Epstein, CFA, Managing Director, Research & Product Management, Proctor Investment Managers LLC

Interest in high-frequency trading continues to grow, yet little has been published to help investors understand and implement high-frequency trading systems—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 this approach to your trading endeavors.

Written by industry expert Irene Aldridge, High-Frequency Trading offers innovative insights into this dynamic discipline. Covering all aspects of high-frequency trading—from the formulation of ideas and the development of trading systems to application of capital and subsequent performance evaluation—this reliable resource will put you in a better position to excel in today's turbulent markets.

Product Details

ISBN-13:	9780470579770
Publisher:	Wiley
Publication date:	12/22/2009
Series:	Wiley Trading , #459
Sold by:	JOHN WILEY & SONS
Format:	eBook
Pages:	368
File size:	4 MB

About the Author

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.

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Table of Contents

Acknowledgments.

Chapter 1 Introduction.

Chapter 2 Evolution of High-Frequency Trading.

Financial Markets And Technological Innovation.

Evolution Of Trading Methodology.

Chapter 3 Overview of the Business of High-Frequency Trading.

Comparison With Traditional Approaches to Trading.

Market Participants.

Operating Model.

Economics.

Capitalizing a High-Frequency Trading Business.

Conclusion.

Chapter 4 Financial Markets Suitable for High-Frequency Trading.

Financial Markets and Their Suitability for High-Frequency Trading.

Conclusion.

Chapter 5 Evaluating Performance of High-Frequency Strategies.

Basic Return Characteristics.

Comparative Ratios.

Performance Attribution.

Other Considerations in Strategy Evaluation.

Conclusion.

Chapter 6: Orders, Traders and their Applicability to High-Frequency Trading.

Order Types.

Order Distributions.

Conclusion.

Chapter 7: Market Inefficiency and Profit Opportunities at Different Frequencies.

Predictability of Price Moves at High Frequencies.

Conclusion.

Chapter: 8: Searching for High-Frequency Trading Opportunities.

Statistical Properties of Returns.

Linear Econometric Models.

Volatility Modeling.

Nonlinear Models.

Conclusion.

Chapter 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.

Chapter 10: Trading on Market Microstructure Inventory Models.

Overview of Inventory Trading Strategies.

Orders, Traders and Liquidity.

Profitable Market Making.

Directional Liquidity Provision.

Conclusion.

Chapter 11: Trading on Market Microstructure Information Models.

Measures of Asymmetric Information.

Information-Based Trading Models.

Conclusion.

Chapter 12: Event Arbitrage.

Developing Event Arbitrage Trading Strategies.

What Constitutes an Event?

Forecasting Methodologies.

Tradeable News.

Application of Event Arbitrage.

Conclusion.

Chapter 13: Statistical Arbitrage in High Frequency Settings.

Mathematical Foundations.

Practical Applications of Statistical Arbitrage.

Conclusion.

Chapter 14: Creating and Managing Portfolios of High-Frequency Strategies.

Analytical Foundations of Portfolio Optimization.

Effective Portfolio Management Practices.

Conclusion.

Chapter 15: Back-Testing Trading Models.

Evaluating Point Forecasts.

Evaluating Directional Forecasts.

Conclusion.

Chapter 16: Implementing High-Frequency Trading Systems.

Model Development Lifecycle.

System Implementation.

Testing Trading Systems.

Conclusion.

Chapter 17: Risk Management.

Determining Risk Management Goals.

Measuring Risk.

Managing Risk.

Conclusion.

Chapter 18: Executing and Monitoring High-Frequency Trading.

Executing High-Frequency Trading Systems.

Monitoring High-Frequency Execution.

Conclusion.

Chapter 19: Post-Trade Profitability Analysis.

Post-Trade Cost Analysis.

Post-Trade Performance Analysis.

References.

About the Web Site. 

About The Author.

Index.