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Risk Management on High-Frequency Trading (HFT)

Posted on the 30 December 2011 by Rodrigosucupira @rodrigosucupira
The tools to measure risk, VaR andStress for example, can also be used for higher frequencies but shouldbe considered the fact that they have a non-linear behavior more pronounced on intraday returns, requiring a more refined analysis.
Risk Management on High-Frequency Trading (HFT)The big issue I see is to understandthe strategy used to then understand what the most appropriate methodology to presenta risk to the decision maker.

The HFT universe expands the universeof data exploration, with respect to risk some phenomena must be considered,for example, effects of liquidity throughout the day.

HFTstrategy can allow open positions overnight.Analyzing this case, we can consider significantthe risk of exposure from one day to another and model separately only the open and close prices data trying to viewthe risk of this open position.
Measuring the risk of an HFT strategycan contrast with some methodologies that just observe a "snapshot" ofthe portfolio or a static display. Measuring risk is to obtain a measure of possibleloss in a given situation. VaR and Stress come only as a methodology for analysisof pre-selected prices data.

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