Posts Tagged ‘Microestructura de Mercado


Paper: Ruido de Microestructura

Modeling microstructure noise with mutually exciting point processes


We introduce a new stochastic model for the variations of asset prices at the tick-by-tick level in dimension 1 (for a single asset) and 2(for a pair of assets). The construction is based on marked point processes and relies on linear self and mutually exciting stochastic intensities as introduced by Hawkes. We associate a counting process withthe positive and negative jumps of an asset price. By coupling suitably the stochastic intensities of upward and downward changes of prices for several assets simultaneously, we can reproduce microstructure noise (i.e. strong microscopic mean reversion at the level of seconds to a few minutes) and the Epps effect (i.e. the decorrelation of the increment sin microscopic scales) while preserving a standard Brownian diffusion behaviour on large scales.More effectively, we obtain analytical closed-form formulae for the mean signature plot and the correlation of two price increments that enable to track across scales the effect of the mean-reversion up to the diffusive limit of the model. We show that the theoretical results are consistent with empirical fits on futures Euro-Bund and Euro-Bobl in several situations.

Link al Paper


Paper: HFT y la microestructura del mercado

Is high-frequency trading inducing changes inmarket microstructure and dynamics?

Using high-frequency time series of stock prices and share volumes sizes from January 2002-May 2009, this paper investigates whether the effects of the onset of high-frequency trading, most prominent since 2005, are apparent in the dynamics of the dollar traded volume. Indeed it is found in almost all of 14 heavily traded stocks, that there has been an increase in the Hurst exponent of dollar traded volume from Gaussian noise in the earlier years to more self-similar dynamics in later years. This shift is linked both temporally to the Reg NMS reforms allowing high-frequency trading to flourish as well as to the declining average size of trades with smaller trades showing markedly higher degrees of self-similarity.
Link al Paper


Regulación Financiera, dark pools y flash trading

Vox tiene un post sobre un tema donde la libre y la tortuga no condicen con su Fabula.


According to the Securities and Exchange Commission, the number of active dark pools dealing in stocks on major US stock markets trebled to 29 in 2009 from about 10 in 2002. For April to June 2009, the total dark pools volume was about 7.2% of the total volumes of all US exchanges.


Dark pools are a private or alternative trading system that allows participants to transact without displaying quotes publicly. Orders are anonymously matched and not reported to any entity, even the regulators (Younglai and Spicer 2009). Thus, the mainstream exchange-traded market does not have any clue about the volume of transactions happening in this parallel market or the prices at which they are being executed. Obviously, price discovery on the mainstream market, without dark pools information, becomes inefficient.


But what is unacceptable is the practice of allowing a privileged minority to flash trade to track the reaction with high-speed processing capacity and the algorithm that can take advantage of the reaction to reap benefits – as this is akin to front-running. It is an example of high-frequency trading system with knowledge of asymmetric information that confuses common investors by simultaneously issuing and cancelling orders and entices them to shell out more for a particular security and, thus, squeezes out their profits.

It was the Chicago Board Options Exchange which pioneered flash orders early this decade to increase its execution speed (Patterson et al. 2009). Flash orders remained in the dark until a newspaper report in 2009 blew the whistle on how Goldman Sachs had made a killing through this route. According to Rosenblatt, flash trading accounted for about 2.4% of the total US stock volumes in June 2009.


Por ultimo, una de las fuentes de este articulo es un trabajo de PWCDark Pools of liquidity


Mr. Roboto, machine or mannequin

Ayer hubo Crash en el Dow, al principio el mundo blog hablo de ordenes abultadas debido a “dedos gordos”

Here’s what I am hearing. There was a “fat finger” that caused someone to execute a large order for PG, a Dow component at a price in the high 30s when it was trading above 60.  Another word out is that someone entered a $16 BILLION trade instead of a $16 million trade – talk about fat fingers. This triggered a lot of stop loss orders in Dow Futures and caused a cascade of losses that at one point reached more than 1000 points on the Dow.

Pero hoy, la responsabilidad del hecho se la adjudican a Mr. Roboto y co.

Here’s the COO of NYSE Euronext speaking to Bloomberg:

May 6 (Bloomberg) — Computerized trades sent to electronic networks turned an orderly stock market decline into a rout, according to Larry Leibowitz, the chief operating officer of NYSE Euronext. Nasdaq OMX Group Inc. canceled trades in 286 securities that rose or fell 60 percent or more.

While the first half of the Dow Jones Industrial Average’s 998.5-point intraday plunge probably reflected normal trading, the selloff snowballed because of orders sent to venues with no investors willing to match them, Leibowitz said in an interview on Bloomberg Television.

“If you look at the charts you can see fairly clearly where the trades came in,” he said from New York. “It’s that V-shaped drop where it came down and snapped right back up. You had some very high-cap stocks trading down 50 percent or large percentages in a split-instant because there really was no liquidity in electronic markets.”

FT Alphaville

Quien mejor para pegarle a los bots que Zero Hedge (Audio Incluido)

“Guys this is probably the craziest I have seen it down here ever.” Here it is, memorialized for the generations and away from the now openly ridiculous disinformation propaganda of the mainstream media, just what a full market meltdown panic sounds like: straight from the epicenter, the S&P 500 pits. Luckily open ouctry still exists, if at least for shock value. Click here for a first hand account of the most shocking 15 minutes in recent market history. Fat finger my ass.

Por ultimo, FT Alphaville postea: una declaración de NASDAQ desligándose de lo ocurrido; y una lista con las acciones afectadas.



Kid Dynamite tiene 3 post que vale la pena leer:

holy cow wtf stocks heres what im hearing

more on crash possible trigger and high frequency trading

does anyone want to defend decision to cancel trades


Paper: Mercados y temblores

The Scale of Market Quakes

We define a methodology to quantify market activity on a 24 hour basis by defining a scale, the so-called scale of market quakes (SMQ). The SMQ is designed within a framework where we analyse the dynamics of excess price moves from one directional change of price to the next. We use the SMQ to quantify the FX market and evaluate the performance of the proposed methodology at major news announcements. The evolution of SMQ magnitudes from 2003 to 2009 is analysed across major currency pairs.

Link al Paper


TIPS: un Modelo y un Paper

David Merkel en su blog postea los resultados de su modelo (que es una extensión de uno de Bear Stearns) para obtener la spot yield curve y forward inflation curve, con el propósito de ver mispricings en las curvas de Treasuries y TIPS.

Sinceramente era un post, que no brindaba mucha información sobre el modelo y sus parametros, hasta que un lector la pidió y luego, Merkel la ofreció parcialmente (ver los comentarios al final del post)

Dato al margen: es genial el Full Disclosure de Merkel:

I own shares in Vanguard’s TIPS fund.  And truth, we all own Treasuries somewhere if we look deep enough.

Por ultimo un paper de la Reserva Federal de Nueva York, The Microstructure of the TIPS Market

We characterize the microstructure of the market for Treasury inflation-protected securities (TIPS) using novel tick data from the interdealer market. We find a marked difference in trading activity between on-the-run and off-the-run securities, as in the nominal Treasury securities market. We find little difference in bid-ask spreads or quoted depth between on-the-run and off-the-run securities, in contrast to the nominal market, but we do find a sharp difference in the incidence of posted quotes. Intraday activity differs strikingly from the nominal market, with activity peaking in the mid-to-late morning. Announcement effects also differ from the nominal market, with auction results and consumer price index announcements eliciting particularly sharp increases in trading activity.

Link del paper (Bajarlo de SSRN)

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"It is hard to be finite upon an infinite subject, and all subjects are infinite." Herman Melville

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July 2020



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