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An Introduction to High Frequency Finance

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An Introduction to High-Frequency Finance

Liquid markets generate hundreds or thousands of ticks (the minimum change in price a security can have, either up or down) every business day. Data vendors such as Reuters transmit more than 275,000 prices per day for foreign exchange spot rates alone. Thus, high-frequency data can be a fundamental object of study, as traders make decisions by observing high-frequency or tick-by-tick data. Yet most studies published in financial literature deal with low frequency, regularly spaced data. For a v

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2 thoughts on “An Introduction to High Frequency Finance”

  1. 3 of 3 people found the following review helpful
    5.0 out of 5 stars
    Definitely mid-frequency in this day and age, July 5, 2011
    By 

    Amazon Verified Purchase(What’s this?)
    This review is from: An Introduction to High Frequency Finance (Hardcover)

    This book doesn’t deal with true high-frequency trading, where it is more about execution than anything else. The book IS ten years old when I write this, so high frequency trading has taken on a different meaning, so no false advert here.

    That said, it is a great treatment of the practical issues of handling large, heterogeneous financial data sets and their statistics. I haven’t seen their methodology and framework anywhere else, although there are some really good treatments of irregularly spaced financial data (Hautsch, Engle).

    The authors are prolific in this area, in particular, the use of tick data to build better volatility models and the use of seasonality (business time scale) and stochastic time (see intrinsic time). They also present a good way to use higher frequency homogeneous data to effectively filter historical volatility computations that makes them more robust when the data is interpolated or sparse. The best part is that they bring everything together for use in multivariate cases and for forecasting/trading.

    Overall, this is a great book, that doesn’t have many peers (if any). I can’t recommend it enough.

    Minor downsides:
    (1) I also agree with the other reviewers on the notation, although it doesn’t bother me that much personally.
    (2) Would be nice to see some type of flowchart for an implementation of the methods in Ch. 6 and later, like they did in Ch. 4.
    (3) No explicit mention of duration and/or point processes, although it is implicit in many of their techniques. This one might be a little unfair because one can’t expect the authors to survey the entire body of literature.

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  2. 33 of 39 people found the following review helpful
    5.0 out of 5 stars
    More Than An Introduction, May 28, 2001
    By A Customer
    This review is from: An Introduction to High Frequency Finance (Hardcover)

    This one of the few books on high frequency finance is a most welcome to the literature. The book is useful not only for people who are new to the subject but also for researchers in the field since it is a most uniform treatment of many topics. From adaptive data cleaning (chapter 4) to intraday and weekly seasonality (chapter 6) and real time trading models (chapter 11), it covers a broad range of topics specific to high frequency financial time series analysis. Chapters on volatility modeling (Chapter 8), forecasting (chapter 9) and correlation and multivariate risk (chapter 10) are enlightening especially for risk exposure analysis and risk management purposes. Finally, the the extensive bibliography is a precious source for those who would like to explore certain topics in detail. I highly recommend it for practitioners as well as researchers in the field.

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