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The Science of Algorithmic Trading and Portfolio Management by Robert Kissell

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Chapter 13

High Frequency Trading and Black Box Models

Ayub Hanif, Ph.D.

In this chapter, Ayub Hanif provides readers with an overview of the high frequency trading environment. We discuss the necessary mathematical knowledge and skills required to be successful in the high frequency trading environment. The chapter discuss the data needs and research, and provides readers with a description of many of the high frequency strategies such as statistical arbitrage, triangular arbitrage, liquidity trading, market-neutral arbitrage, index and ETF arbitrage, and merger (risk) arbitrage. The chapter continues with discussion of the evaluation and back-testing techniques to critique the model, and an overview of the statistical metrics used by financial ...

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