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High-Frequency Quoting: Short-Term Volatility in Bids and Offers
Ist Teil von
Journal of financial and quantitative analysis, 2018-04, Vol.53 (2), p.613-641
Ort / Verlag
New York, USA: Cambridge University Press
Erscheinungsjahr
2018
Link zum Volltext
Quelle
EBSCOhost Business Source Ultimate
Beschreibungen/Notizen
At subsecond horizons, bids and offers in U.S. equity markets are more volatile than what would be implied by long-term fundamentals. To assess costs and consequences, this paper suggests that traders’ random delays (latencies) interact with quote volatility to generate execution price risk and relative latency costs. Analysis of the behavior of quote setters suggests that this volatility is more likely to arise from recurrent cycles of undercutting similar to the Edgeworth cycles found in product markets rather than mixed strategies of limit-order placement.