In addition, statistical arbitrage is powerful in high frequency settings as it provides a simple set of clearly defined conditions that are easy to implement in a systematic fashion in high frequency settings. This paper presents a high frequency strategy based on deep neural networks dnns. Highfrequency trading a discussion of relevant issues. Statistical arbitrage strategies highfrequency trading. The book introduces readers to the general issues and problems in market microstructure and further delves into inventory, informationbased, and strategic trader models of informed and uninformed. Firstly, i thoroughly enjoyed reading your recent book on quant trading. We implemented a trading strategy that nds the correlation between two or more assets and trades if there is a strong deviation from this correlation, in a high frequency setting. Request pdf statistical arbitrage trading strategies and high frequency trading statistical arbitrage is a popular trading strategy employed by hedge funds and proprietary trading desks, built. Pdf highfrequency trading strategy based on deep neural. Arbitrage in stock index futures brennan, schwartz.
A profit situation arising from pricing inefficiencies between securities. This book is a comprehensive guide to the theoretical work in market microstructure research and is an essential read for a high frequency trader. The dnn was trained on current time hour and minute, and \ n \lagged oneminute pseudoreturns, price. Pdf high frequency trading strategies, market fragility. Current proprietary trading strategies include index arbitrage, statistical arbitrage, merger arbitrage, fundamental analysis, volatility arbitrage, and macrotrading. An investment strategy that attempts to profit from the differences between actual and theoretical futures prices of the same stock index. Statistical arbitrage in high frequency trading based on. It is based on solid economic theories is likely to have longer staying power than strategies based purely on statistical phenomena. High frequency 100 milliseconds or less 10 seconds to 10 minutes. Trading process an intuitive way to classify algorithmic trading is through the separate processes being automated within a trades life cycle. High frequency trading a discussion of relevant issues may 20 4 hft is a technology applied to a broad spectrum of strategies a conclusive definition of hft is difficult since it is the technology necessary for implementing a broad. Im attempting to implement and intraday index arb strategy, thus i would need to construct a basket with a much shorter halflife. Basket of stocks vs futures, etf constituents vs etf if nav deviates.
High frequency trading strategies, market fragility and price spikes. Investors identify the arbitrage situation through mathematical modeling techniques. Broadly speaking, the traditional approach to statistical arbitrage is through attempting to bet on the temporal convergence and divergence of price movements of pairs and baskets of assets, using statistical methods. A question with regards to the halflife concept above.
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