Anton Golub

Intrinsic time is an example of an event-based conception of time, used to analyze financial time series. Here, for the first time, we reveal the connection between intrinsic time and physical time. In detail, we present an analytic relationship which links the two different time paradigms. Central to this discovery are the emergence of scaling laws. Indeed, a novel empirical scaling law is presented, relating to the variability of what is know as overshoots in the intrinsic time framework. To… عرض المزيد

Intrinsic time is an example of an event-based conception of time, used to analyze financial time series. Here, for the first time, we reveal the connection between intrinsic time and physical time. In detail, we present an analytic relationship which links the two different time paradigms. Central to this discovery are the emergence of scaling laws. Indeed, a novel empirical scaling law is presented, relating to the variability of what is know as overshoots in the intrinsic time framework. To evaluate the validity of the theoretically derived expressions, three time series are analyzed; in detail, Brownian motion and two tick-by-tick empirical currency market data sets (one crypto and one fiat). Finally, the time series analyzed in physical time can be decomposed into their liquidity and volatility components, both only visible in intrinsic time, further highlighting the utility of this temporal kinship. عرض أقل

We describe an agent-based model where trades happen in event-based time called directional-change intrinsic time. Events are defined as the reversal price moves of a directional-change threshold from a local extreme. The price impact of traded volumes is modelled according to the empirically observed squared root impact function. The time series generated by the agents is characterised by statistical properties typical for foreign-exchange rates: low autocorrelation of returns, fat-tailed… عرض المزيد

We describe an agent-based model where trades happen in event-based time called directional-change intrinsic time. Events are defined as the reversal price moves of a directional-change threshold from a local extreme. The price impact of traded volumes is modelled according to the empirically observed squared root impact function. The time series generated by the agents is characterised by statistical properties typical for foreign-exchange rates: low autocorrelation of returns, fat-tailed distribution of returns, aggregated normality, and the price jump scaling law. Furthermore, we introduce and use as a benchmark, the overshoot scaling law, which is an omnipresent feature of liquid markets and relates the expected length of price overshoots to the length of the corresponding directional-change threshold. عرض أقل

Due to the increasing prevalence of high-frequency algorithmic trading and FinTech developments like blockchain, there is a shift towards very short trading horizons and immediate settlement. This creates a demand for an ultra-short tenor interest rate curve that is updated in real-time. Our paper develops a practical market model for the equilibrium intraday interest rates which provides market makers adequate incentives to attenuate flash crashes. Our model suggests that the intraday CHF… عرض المزيد

Due to the increasing prevalence of high-frequency algorithmic trading and FinTech developments like blockchain, there is a shift towards very short trading horizons and immediate settlement. This creates a demand for an ultra-short tenor interest rate curve that is updated in real-time. Our paper develops a practical market model for the equilibrium intraday interest rates which provides market makers adequate incentives to attenuate flash crashes. Our model suggests that the intraday CHF interest rates should have been highly negative during the flash crash of EURCHF on 15 January 2015, which could potentially stop the long CHF short EUR strategy and reduce the severity of the crash. عرض أقل

We extend the intrinsic time directional-change methodology to multidimensional space. The methodology is explored in the context of currencies where the currencies are orthogonal dimensions. The intrinsic time ticks whenever the price reverses from the local maximum/minimum by a certain percentage. We generalise the concept of the price move direction to the space of many dimensions. Scaling laws which were reported for one-dimensional Forex time series are now reproduced in the… عرض المزيد

We extend the intrinsic time directional-change methodology to multidimensional space. The methodology is explored in the context of currencies where the currencies are orthogonal dimensions. The intrinsic time ticks whenever the price reverses from the local maximum/minimum by a certain percentage. We generalise the concept of the price move direction to the space of many dimensions. Scaling laws which were reported for one-dimensional Forex time series are now reproduced in the multidimensional space. We report the increased systematic curvature in the fitted Forex scaling law data. The increase in the curvature size is associated with dimensionality growth. We discuss how the novel methodology can be used as a method to estimate multidimensional volatility. The paper provides various ideas for practical applications of the multidimensional directional-change methodology for data analysis. عرض أقل

We propose a novel intraday instantaneous volatility measure which utilizes sequences of drawdowns and drawups non-equidistantly spaced in physical time as indicators of high-frequency activity of financial markets. The sequences are re-expressed in terms of directional-change intrinsic time which ticks only when the price curve changes the direction of its trend by a given relative value. We employ the proposed measure to uncover weekly volatility seasonality patterns of three Forex and one… عرض المزيد

We propose a novel intraday instantaneous volatility measure which utilizes sequences of drawdowns and drawups non-equidistantly spaced in physical time as indicators of high-frequency activity of financial markets. The sequences are re-expressed in terms of directional-change intrinsic time which ticks only when the price curve changes the direction of its trend by a given relative value. We employ the proposed measure to uncover weekly volatility seasonality patterns of three Forex and one Bitcoin exchange rates, as well as a stock market index. We demonstrate the long memory of instantaneous volatility computed in directional-change intrinsic time. The provided volatility estimation method can be adapted as a universal multiscale risk-management tool independent of the discreteness and the type of analysed high-frequency data. عرض أقل

This document provides guidelines how to implement trading halts at Lykke exchange, in events of extraordinary volatility due to market or technical issues. It gives a summary on current practices on other exchanges and existing regulation.

We introduce a new approach to algorithmic investment management that yields profitable automated trading strategies. This trading model design is the result of a path of investigation that was chosen nearly three decades ago. Back then, a paradigm change was proposed for the way time is defined in financial markets, based on intrinsic events. This definition lead to the uncovering of a large set of scaling laws. An additional guiding principle was found by embedding the trading model… عرض المزيد

We introduce a new approach to algorithmic investment management that yields profitable automated trading strategies. This trading model design is the result of a path of investigation that was chosen nearly three decades ago. Back then, a paradigm change was proposed for the way time is defined in financial markets, based on intrinsic events. This definition lead to the uncovering of a large set of scaling laws. An additional guiding principle was found by embedding the trading model construction in an agent-base framework, inspired by the study of complex systems. This new approach to designing automated trading algorithms is a parsimonious method for building a new type of investment strategy that not only generates profits, but also provides liquidity to financial markets and does not have a priori restrictions on the amount of assets that are managed. عرض أقل

Lykke Corp is a FinTech company based in Zurich that has launched the first global marketplace for all asset classes and instruments, using the Colored Coin protocol on blockchain. The paper explains the architecture of the exchange and first use cases. We discuss, how the exchange will evolve over time. We explore the macroeconomic benefits of the new technology. The Lykke exchange operates similar to JAVA in the sense that it is compatible with any type of blockchain; marketplace was first… عرض المزيد

Lykke Corp is a FinTech company based in Zurich that has launched the first global marketplace for all asset classes and instruments, using the Colored Coin protocol on blockchain. The paper explains the architecture of the exchange and first use cases. We discuss, how the exchange will evolve over time. We explore the macroeconomic benefits of the new technology. The Lykke exchange operates similar to JAVA in the sense that it is compatible with any type of blockchain; marketplace was first developed on blockchain of Bitcoin, but is currently expanded to Ethereum. Every financial instrument can become a listed security on the blockchain in the form of a digital token, through the so-called Colored Coin protocol. Colored coins follow the idea of "coloring" a specific Bitcoin - the issuer guarantees to hand out the underlying assets to the person, who returns the Colored Coin. For example, the Federal Reserve (FED) can issue a colored coin in the same way as it prints paper money; it would take a fraction of a Bitcoin and then insert the "I Owe You" statement of the FED, like a regular bank note. The same mechanism can be used for any other financial claim. Colored Coins are different in nature than crypto-currencies, because they have a specific issuer and are backed by a real financial asset. Reporting of colored coins in traditional banking software systems, such as bookkeeping and risk management is straightforward, because every colored coin can include an International Securities Identification Number (ISIN), thus can be treated as any other financial instrument, fully compatible with existing back-office systems. Financial institutions can create colored coins for existing financial products and gradually move business processes to blockchain. In the new system, interest rate payments are second by second improving liquidity provision. عرض أقل

We introduce an event based framework mapping financial data onto a state based discretisation of time series. The mapping is intrinsically multi-scale and naturally accommodates itself with tick-by-tick data. Within this framework, we define an information theoretic quantity that characterises the unlikeliness of price trajectories and, akin to a liquidity measure, detects and predicts stress in financial markets. In particular, we show empirical examples within the foreign exchange market… عرض المزيد

We introduce an event based framework mapping financial data onto a state based discretisation of time series. The mapping is intrinsically multi-scale and naturally accommodates itself with tick-by-tick data. Within this framework, we define an information theoretic quantity that characterises the unlikeliness of price trajectories and, akin to a liquidity measure, detects and predicts stress in financial markets. In particular, we show empirical examples within the foreign exchange market where the new measure not only quantifies liquidity but also seems to act as an early warning signal. عرض أقل

In this paper, we model discrete time series as discrete Markov processes of arbitrary order and derive the approximate distribution of the Kullback-Leibler divergence between a known transition probability matrix and its sample estimate. We introduce two new information-theoretic measurements: information memory loss and information codependence structure. The former measures the memory content within a Markov process and determines its optimal order. The latter assesses the codependence among… عرض المزيد

In this paper, we model discrete time series as discrete Markov processes of arbitrary order and derive the approximate distribution of the Kullback-Leibler divergence between a known transition probability matrix and its sample estimate. We introduce two new information-theoretic measurements: information memory loss and information codependence structure. The former measures the memory content within a Markov process and determines its optimal order. The latter assesses the codependence among Markov processes. Both measurements are evaluated on toy examples and applied on high frequency foreign exchange data, focusing on 2008 financial crisis and 2010/2011 Euro crisis. عرض أقل

We discuss how maximum entropy methods may be applied to the reconstruction of Markov processes underlying empirical time series and compare this approach to usual frequency sampling. It is shown that, at least in low dimension, there exists a subset of the space of stochastic matrices for which the MaxEnt method is more efficient than sampling, in the sense that shorter historical samples have to be considered to reach the same accuracy. Considering short samples is of particular interest when… عرض المزيد

We discuss how maximum entropy methods may be applied to the reconstruction of Markov processes underlying empirical time series and compare this approach to usual frequency sampling. It is shown that, at least in low dimension, there exists a subset of the space of stochastic matrices for which the MaxEnt method is more efficient than sampling, in the sense that shorter historical samples have to be considered to reach the same accuracy. Considering short samples is of particular interest when modelling smoothly non-stationary processes, for then it provides, under some conditions, a powerful forecasting tool. The method is illustrated for a discretized empirical series of exchange rates. عرض أقل

This is the survival guide for trading in a world where high-frequency trading predominates in markets, accounting for upwards of 60% of trading in equities and futures, and 40% in foreign exchange. High-frequency trading is the subject of extensive debate, particularly as to whether it is beneficial for traders and markets or instead allows some traders to benefit at others expense. This book provides you with an important overview and perspective on this area, with a particular focus on how… عرض المزيد

This is the survival guide for trading in a world where high-frequency trading predominates in markets, accounting for upwards of 60% of trading in equities and futures, and 40% in foreign exchange. High-frequency trading is the subject of extensive debate, particularly as to whether it is beneficial for traders and markets or instead allows some traders to benefit at others expense. This book provides you with an important overview and perspective on this area, with a particular focus on how low-frequency traders and asset managers can survive in the high frequency world. عرض أقل

We analyse all Mini Flash Crashes (or Flash Equity Failures) in the US equity markets in the four most volatile months during 2006-2011. In contrast to previous studies, we find that Mini Flash Crashes are the result of regulation framework and market fragmentation, in particular due to the aggressive use of Intermarket Sweep Orders and Regulation NMS protecting only Top of the Book. We find strong evidence that Mini Flash Crashes have an adverse impact on market liquidity and are associated… عرض المزيد

We analyse all Mini Flash Crashes (or Flash Equity Failures) in the US equity markets in the four most volatile months during 2006-2011. In contrast to previous studies, we find that Mini Flash Crashes are the result of regulation framework and market fragmentation, in particular due to the aggressive use of Intermarket Sweep Orders and Regulation NMS protecting only Top of the Book. We find strong evidence that Mini Flash Crashes have an adverse impact on market liquidity and are associated with Fleeting Liquidity. عرض أقل

The report discusses the impact of internalisation on liquidity provision in the US and EU equity
markets. We start with an introduction to internalisation and its role in modern capital markets.
We present the internalisation practice from the perspectives of the internaliser, the retail and
institutional investors as well as the liquidity provider in displayed trading centres. Academic
work on internalisation is surveyed before we evaluate the costs and benefits of… عرض المزيد

The report discusses the impact of internalisation on liquidity provision in the US and EU equity
markets. We start with an introduction to internalisation and its role in modern capital markets.
We present the internalisation practice from the perspectives of the internaliser, the retail and
institutional investors as well as the liquidity provider in displayed trading centres. Academic
work on internalisation is surveyed before we evaluate the costs and benefits of internalisation
for each of the trading participants mentioned above. Four potential regulatory measures on
internalisation are then presented, namely the “trade-at” rule, sub-penny pricing for retail liquidity providers, minimum size requirement and dark pool quote threshold. Specifically, we
evaluate how each of the four proposed measures may affect internalisation practices, retail
and institutional investors, and the overall market quality. With the exception of the dark pool
quote threshold, the proposed measures are intended to restrain internalisation, as there is general agreement that opaque execution and unfair competition will harm market quality. Finally, we evaluate the costs, risks and benefits for each of the four proposed measures, and provide a guideline for the future of regulatory developments. عرض أقل

This paper develops a new correlation stress testing technique to decompose high-dimensional correlation matrices into different components constructed by eigenvalues and eigenvectors and then allow data-coherent stress tests in correlations while maintain the desirable mathematical properties of correlation matrices, e.g. positive semi-definiteness. We use the Random Matrix Theory to filter “noise” components, identify the hidden patterns of eigenvectors, and interpret the meanings of… عرض المزيد

This paper develops a new correlation stress testing technique to decompose high-dimensional correlation matrices into different components constructed by eigenvalues and eigenvectors and then allow data-coherent stress tests in correlations while maintain the desirable mathematical properties of correlation matrices, e.g. positive semi-definiteness. We use the Random Matrix Theory to filter “noise” components, identify the hidden patterns of eigenvectors, and interpret the meanings of macroeconomic and microeconomic scenarios. We help users to propose meaningful data-coherent macroeconomic scenarios when they have large-dimensional correlation matrices and many hypothetical scenarios to choose from. This is the first paper in the literature which introduces the Random Matrix Theory to stress testing. We use an empirical example based on the Chinese equity market to show how to implement our model. Interestingly, we find that the top 3 most important components in our dataset are the market impact, the government influence, and the real-estate industry impact. We conduct some hypothetical stress tests to show how the stressed eigenvalues lead to structural changes in correlations and to generate valid post-stressed correlation matrices. Our approach could be easily extended to multi market correlation stress testing. عرض أقل

Wildland fires are the representatives of natural disasters with serious ecological, social, health and economic consequences and as an example of an extremely complex phenomenon require a rigorous scientific approach. We will present an analysis of more than 45 000 wildland fires recorded in the period from 1996 to 2007 on the territory of the Republic of Croatia. Statistical laws describing the distribution of burned area and fire dynamics exhibit universal forms and their parameters can be… عرض المزيد

Wildland fires are the representatives of natural disasters with serious ecological, social, health and economic consequences and as an example of an extremely complex phenomenon require a rigorous scientific approach. We will present an analysis of more than 45 000 wildland fires recorded in the period from 1996 to 2007 on the territory of the Republic of Croatia. Statistical laws describing the distribution of burned area and fire dynamics exhibit universal forms and their parameters can be correlated with the population, historical and climatic features, vegetation, and the basic characteristics of the local fire protection (e.g., number of firefighters, average length...). Such statistical analysis can help determine the probability of new events of certain characteristics, and modeling of the possible fire propagation at a particular location. All this demonstrates the importance of the formation of high-quality database with all relevant information and appropriate structuring by type of information or purpose of its treatment. عرض أقل