Financial Markets Tick By Tick

Financial Markets Tick by Tick is an in-depth and unique collection of analyses of the behaviour of the financial markets at the micro level. Its publication is particularly timely, given the current period of high volatility in the financial markets. LIFFE are proud to be associated with a text which features so many leading quantitative analysts, risk managers, academics and experts in this highly specialized field.

Introduction:

Financial markets are being swept by important changes affecting the way market participants interact and operate. As a recent example, both over the counter and exchange based market practitioners have considered and applied in some sort of way computerized trading as an alternative to open out-cry. These developments have contributed toward a more efficient market and potentially a better service to the end oufs er financial products. The phenomenal progress in information technology made over the last decade has been a catalyst to these changes.

Maybe a less apparent but not the least important contributor to these changes is the wider use of high frequency time price series in the decisionmaking process. The advent of second generation microprocessors has made it possible to process large amount of data within a realistic time frame to make practical use of it. Undoubtedly the analysis of high frequency data brings us a wealth of information about the behavior of financial prices and new perspectives in the field of risk management and forecasting which were previously inconceivable. It permits market practitioners to test hypotheses and new trading strategies. It provides new resources to model and generate correlation and volatility estimates input into pricing and risk models. Acknowledging the demand, statistical departments of financial exchanges and other data suppliers have started to release ”clean” high frequency price data in convenient format. This has translated into a steady flow of research papers on high frequency modelling producedb y both academics and market practitioners.

This book intends to give the reader a broad view on the uses and avenues of research presently investigated. It regroups researches from leading academics and market practitioners in the foief lhdi gh frequency data. It is structured around three sections addressing practical issues that are paramount to the financial community. The first section of the book is dedicated to price volatility and risk estimators, the second section concentrates on statistical features and forecasting issues. Finally, the last section illustrates how ”tick data” affect the way that market practitioners operatein the financial markebtsy giving practical examples of applications.