Advances in High Frequency Strategies

Doctoral Dissertation, Complutense University, Madrid, 2011

42 Pages Posted: 14 Jul 2012 Last revised: 8 Aug 2015

Marcos Lopez de Prado

Guggenheim Partners, LLC; Lawrence Berkeley National Laboratory; Harvard University - RCC

Date Written: December 1, 2011

Abstract

SEC and CFTC reports estimate that High Frequency strategies are responsible for about 60% of all transactions on U.S. shares. In Europe, this percentage is around 40% and growing. High Frequency strategies are those characterized by a brief holding period, which can range from a split second to a few hours. This enables traders to place numerous independent bets per day on an instrument or portfolio, profiting from the multiplicative effect postulated by the Fundamental Law of Active Management. The goal is to exploit inefficiencies derived from the market’s microstructure (rigidities, agents’ idiosyncrasies, asymmetric information, etc.). The generalization of electronic markets and ubiquitous automation of financial transactions has rendered many established models and theories obsolete. The objective of this work is to present a new scientific framework for the study of some of the most relevant questions concerning High Frequency.

Keywords: High Frequency Trading, Market Microstructure, Trading Strategies, Execution, Market Making, Risk Modeling, Portfolio Optimization

JEL Classification: C02, D52, D53, G14

Suggested Citation

Lopez de Prado, Marcos, Advances in High Frequency Strategies (December 1, 2011). Doctoral Dissertation, Complutense University, Madrid, 2011. Available at SSRN: https://ssrn.com/abstract=2106117 or http://dx.doi.org/10.2139/ssrn.2106117

Marcos Lopez de Prado (Contact Author)

Guggenheim Partners, LLC ( email )

330 Madison Avenue
New York, NY 10017
United States

HOME PAGE: http://www.QuantResearch.org

Lawrence Berkeley National Laboratory ( email )

1 Cyclotron Road
Berkeley, CA 94720
United States

HOME PAGE: http://www.lbl.gov

Harvard University - RCC ( email )

26 Trowbridge Street
Cambridge, MA 02138
United States

HOME PAGE: http://www.rcc.harvard.edu

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