Advances in High Frequency Strategies

Doctoral Dissertation, Complutense University, Madrid, 2011

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

See all articles by Marcos Lopez de Prado

Marcos Lopez de Prado

Cornell University - Operations Research & Industrial Engineering; AQR Capital Management, LLC

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

López 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 López de Prado (Contact Author)

Cornell University - Operations Research & Industrial Engineering ( email )

237 Rhodes Hall
Ithaca, NY 14853
United States

HOME PAGE: http://www.orie.cornell.edu

AQR Capital Management, LLC

One Greenwich Plaza
Greenwich, CT 06830
United States

HOME PAGE: http://www.aqr.com

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