To our parents and families

CONTENTS

LIST OF FIGURES xv LIST OF TABLES xix PREFACE xxi ACKNOWLEDGMENTS xxiii

INTRODUCTION

I.+ Markets: The Source of High-Frequency Data 1

1.2 Methodology of High-Frequency Research 2

1.3 Data Frequency and Market Information 3

1.4 New Levels of Significance 6

1.5 Interrelating Different Time Scales 8

MARKETS AND DATA

2.1 General Remarks on Markets and Data Types

2.1.1 Spot Markets

2.1.2 Futures Markets

2.1.3 Option Markets

2.2 Foreign Exchange Markets

2.2.1 Structure of the Foreign Exchange Spot Market

2.2.2 Synthetic Cross Rates

2.2.3 Multiple Contributor Effects

2.3 Over-the-Counter Interest Rate Markets

2.3.1 Spot Interest Rates

2.3.2 Foreign Exchange Forward Rates

2.4 Interest Rate Futures

2.4.1 General Description of Interest Rate Futures

2.4.2 Implied Forward Interest Rates and Yield Curves

2.5 Bond Futures Markets

2.5.1 Bonds and Bond Futures

2.5.2 Rollover Schemes

2.6 Commodity Futures

2.7 Equity Markets

1*

TIME SERIES OF INTEREST

3.1 Time Series and Operators

3.2 Variables in Homogeneous Time Series

3.2.1 Interpolation

3.2.2 Price

3.2.3 Return

3.2.4 Realized Volatility

3.2.5 Bid-Ask Spread

3.2.6 Tick Frequency

3.2.7 Other Variables

3.2.8 Overlapping Returns

3.3 Convolution Operators

3.3.1 Notation Used for Time Series Operators

3.3.2 Linear Operator and Kernels

3.3.3 Build-Up Time Interval

3.3.4 Homogeneous Operators and Robustness

3.3.5 Exponential Moving Average (EMA)

3.3.6 The Iterated EMA Operator

3.3.7 Moving Average (MA)