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INDEX

activity

activity variable, see variable

market activity, 175, 177, 183 approach

macroeconomic, 5

microstructure, 2

time series, 2 arbitrage

formula, 29

opportunities, 28

riskfree, 22

triangular arbitrage, 118, 127 ARCH, see model

Bank for International Settlements, 137 basis point, 23, 125, 171 BHHH algorithm, 223 bias, 44

bias of realized volatility, see volatility

market maker bias, 154 bid-ask bounce, 124 Black and Scholes, 43 Brownian motion, 49 build-up, 52, 87, 223, 263

error, 56

time interval, 56

business-time scale, see time scale

call for margin, 12 capital management system, 296 cash interest rates, 21 cheapest-to-deliver, 29, 31 conditional heteroskedasticity, 204 conditional predictability, 215 convergence, 163, 320

model estimation, 223 correlation, 268

adjusted correlation measure, 272

breakdown, 270, 277

covolatility weighting, 268, 270

Epps effect, 269, 288

linear correlation coefficient, 272

memory, 293

variations, 278 counterparty default risk, 11 covariance, 268

cross-covariance, 124

matrix, 116, 346

realized, 50 credit ratings, 28 credit risk, 128 credit spread, 21 cross rate, 16, 19 cross-covariance, 124

Telerate, 15, 128, 186 data-generating process, 122, 328, 338, model

day-of-the-week effect, 169 daylight saving time, 164, 190 delivery risk, 170 deseasonalized returns, 197 directing process, 176 direction change indicator, 47 direction quality, 262 distribution, see probability distribution

nonstable, 142 Dow Jones Industrials, 8 dynamic memory, 255 dynamic optimization, 246 dynamic overlay, see hedging

economic forecast, 129

economic news announcement, 130

econophysicist, 9

effective news, 130

effective number of observations, 50

efficient frontier, 341

efficient markets, 349, 354

electronic order-matching system, 15

Electronic Broking Services (EBS), 15

Reuters Dealing 2000, 15 EMA-HARCH, see model Epps effect, see correlation, 293 equity indices, 32 EUREX, 24 EURIBOR, 25 Euro, 24 Eurodeposits, 21 Eurofutures contracts, 121 Eurolira, see market, Eurofutures European Monetary System (EMS), 127 Euroyen, see market, Eurofutures expiry, 12, 29,31

quarterly expiry, 24

time-to-expiry, 31 exponential attenuation, 293 exponential decline, 209 exponential memory, 282 exposure, 339 extreme events, 6 extreme risks, 144 extreme value theory, 138

fat-tailedness, 132 FIGARCH, see model

cumulative distribution function, 173

daily time series, 174 data

ask, 12, 15

bid, 12,15

bid-ask price, see price bid-ask spread, see spread daily, 14

data cleaning, see filter data filter, see filter dependent quote, 95 effective price, see price effective spread, see spread empirical, 132 high-frequency, 1, 10, 32, 33 historical, 16 homogeneous, 35 inhomogeneous, 35 interest rate, 21 intraday, 14 irregularly spaced, 1 low-frequency, 14 quote, 1

quoted spread, see spread quotes, 15 regularly spaced, 1 sparse, 3

synthetic regular, 54

tick, see tick, 38

tick-by-tick, 1, 4, 6, 51

time stamp, 15

traded spread, see spread

transaction price, 1, 15

weekly, 14 data cleaning, 82 data error, 85

decimal error, 85

human error, 85 intentional error, 85 unintentional error, 85

repeated ticks, 86

scaling problem, 86

system error, 85

test, 85

early morning test, 86 monotonic series, 86

tick copying, 86 data providers, 11

Bloomberg, 11, 15

Bridge, 11,46,186

Knight Ridder, 15,186

Reuters, 11, 15,46, 186