Almgren (2012) - Compute exponential moving averages of the
midpoint price time series, both from the left (backwards-looking)
and from the right (forward-looking), with a variety of different
time constants. The difference between the left-moving average and
the right-moving average has a peak at the time of the event: the lo-
cation and magnitude of this peak let us precisely locate the timing
and significance of the event response.
For any “significant” information
event, the algorithm must take defensive actions before the event
happens, such as removing limit orders from the book and aligning
itself with the forecast schedule if the desired order type is based
on a schedule. Also, all such events must be included into forecast
curves for intraday volume and volatility
Change in Nonfarm Payrolls is in a class by itself in terms of
significance. It consistently causes price jumps of more than
ten ticks. The time is always quite close to the scheduled time,
within a fraction of a second.
FOMC Rate Decision is highly significant, at least for US rates
products. The time offset is a minute or more, and the uncer-
tainty in time is several minutes.
Almostneverarenon-USeventssignificantforUSrates
For European products, US events are the most important, and only a few European events rise to significance
Unlike equities, fixed income are highly correlated. Use cointegration for short term predictability. Use PCA of Shintani (2001)
and Chigira (2008)
This (estimate covariance matrix using the whole sample, then calculate the PC's) forward-looking construction is used only for an exam-
ple; in practice a rolling volume-weighted average would be used. Also remember to normalize the return by its standard deviation. After normalising the two PC's are in fact (1,1) and (1,-1).
it is a common belief that futures prices move more
quickly than the underlying cash instruments. There is also some
empirical evidence that interest rates futures of longer durations
lead futures of shorter duration
As for hitting limit order, majority of markets are time-based. Some such as Euro dollar future front month is pro data. So if best bid: 20,200. And someone hits 22, then best bid now: 18,180.
For this pro data market, there is no disincentive for cancelling order. So book is much bigger.
As for hitting limit order, majority of markets are time-based. Some such as Euro dollar future front month is pro data. So if best bid: 20,200. And someone hits 22, then best bid now: 18,180.
For this pro data market, there is no disincentive for cancelling order. So book is much bigger.
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