Multi-Scale Representation of High Frequency Market Liquidity

26 Pages Posted: 12 Feb 2014

See all articles by Anton Golub

Anton Golub

Flov technologies

Gregor Chliamovitch

University of Geneva

Alexandre Dupuis

Olsen Ltd.; University of Geneva

Bastien Chopard

University of Geneva

Date Written: February 10, 2014

Abstract

We introduce an event based framework of directional changes and overshoots to map continuous financial data into the so-called Intrinsic Network - a state based discretisation of intrinsically dissected time series. Defining a method for state contraction of Intrinsic Network, we show that it has a consistent hierarchical structure that allows for multi-scale analysis of financial data. We define an information theoretic measurement termed Liquidity that characterises the unlikeliness of price trajectories and argue that the new metric has the ability to detect and predict stress in financial markets. We show empirical examples within the Foreign Exchange market where the new measure not only quantifies liquidity but also acts as an early warning signal.

Keywords: Liquidity, Information Theory, Multi-Scale, Foreign Exchange, High Frequency Trading

JEL Classification: C50, G14, F31

Suggested Citation

Golub, Anton and Chliamovitch, Gregor and Dupuis, Alexandre and Chopard, Bastien, Multi-Scale Representation of High Frequency Market Liquidity (February 10, 2014). Available at SSRN: https://ssrn.com/abstract=2393428 or http://dx.doi.org/10.2139/ssrn.2393428

Anton Golub (Contact Author)

Flov technologies ( email )

Gotthardstrasse 26
Zug, Zug 6300
Switzerland

Gregor Chliamovitch

University of Geneva

rte de Drize 7
Genève, CH - 1227
Switzerland

Alexandre Dupuis

Olsen Ltd. ( email )

Seefeldstrasse 233
Zurich, 8008
Switzerland

University of Geneva ( email )

102 Bd Carl-Vogt
Genève, CH - 1205
Switzerland

Bastien Chopard

University of Geneva ( email )

40, Boulevard du Pont-d'Arve
Genève, CH - 1205
Switzerland

Register to save articles to
your library

Register

Paper statistics

Downloads
256
Abstract Views
1,531
rank
120,366
PlumX Metrics