filter

adaptive method, 98 after-jump algorithm, 105 artificial quote method, 118 ask quote, 110 bid quote, 110 bid-ask quote, 110 bid-ask spread, 110 build-up period, 87 credibility, 93, 114 data cleaning, 82 data filter, 82 decimal error, 113 domain error, 111 filter configuration, 113 filter parameters, 116 filtering algorithm, 89 credibility, 89

full-tick filtering window, 89

scalar filtering window, 89

univariate filter, 89 filtering hypothesis, 113

error hypothesis, 113

winning hypothesis, 113 forward premiums/discounts, 111 full-quote filtering window, 109

quote splitting, 110 high-quality data, 100 historical mode, 115 historical operation, 87 interest rate, 111 level filter, 88, 91 level quote, 110 multivariate filtering, 100, 116

filtering sparse data, 116 next point interpolation, 96 pair filtering, 88, 93, 98 price, 111

real-time mode, 115

real-time operation, 87

repeated quotes, 100

scalar filtering window, 103 filter test, 104 the normal update, 104

scalar quote, 110

scalar window

dismissing scalar quotes, 107

scaling factor, 113

second scalar window, 108

sensitivity analysis, 120

short-term interest-rate futures, 111

spread filter, 98

spread quoting, 98

strong filter, 116

time scale, 100

timing, 87

trust capital, 90, 104

univariate filtering, 113, 116

validity test, 110

weak (tolerant) filter, 116 finite variance, 132 first position, 30 forecasting, 248

forecast accuracy, 246, 262

forecast effectiveness, 264

forecast horizon, 264

forecast quality, 261

forecasting model, 249

multivariate forecasting, 249

real-time price forecasting system, 250

signal correlation, 263 forecasting signal, 263 real signal, 263

volatility forecast, 250 forecasting performance, 243

benchmark comparison, 245

direction quality, 245

realized potential, 245 foreign exchange (FX) market, see market forward discount, 23 forward interest rate, 25 forward points, 23 forward premium, 23 forward rate, 22, 25 fractal behavior, 8, 209 fractional noise process, 207 FXFX page, 16

GARCH, see model Gaussian distribution, 135, 155 genetic algorithm, 223, 317

adaptive clustering, 319

multi-modal function, 318

sharing scheme, 319 genetic programming, 311

closure property, 312

function nodes, 312

syntactic restrictions, 313

terminal nodes, 312

tournament selection, 315 geographical components, 179 geometric mean, 170 goodness-of-fit, 285 granularity, 171

HARCH, see model

INDEX

heat-wave component, 207 heat-wave effect, 209, 214, 352 hedge funds, 17 hedging, 31

currency overlay, 343

currency risk, 209, 340

dynamic hedging, 340, 345

instruments, 24

neutral point, 343

ratio, 343 heterogeneity, 44

heterogeneous market hypothesis, see hypothesis

heteroskedasticity, 35, 162

autoregressive conditional, 265 Hill estimator, 145 holiday

half-day, 190 holidays, see market hyperbolic decline, 210 hypothesis

heal wave hypothesis, 179

heterogeneous market hypothesis, 209,210, 224

island hypothesis, 179

meteor shower hypothesis, 179, 206

IGARCH, see model implied interest rate, 25 implied volatility, see volatility index

•AMEX Stock Index, 283 Down Jones Index, 283 indicator, 257

antisymmetric, 315 cycle, 310

overbought and oversold, 310

symmetric, 315

timing, 310

trend following, 310

volatile indicator, 259 information set, 82, 249 instability, 259

institutional constraints, 14, 128 institutional framework, 127 institutional investors, 17 interbank interest rates, 21 interbank money market rates, 121 interpolation, see method intervention, 129

official, 129 intraday

analysis, 127

movements, 174

prices, 174

statistics, 163

volatility, 174 intraweek

analysis, 177

statistics, 163

volatility, 174 intrinsic time, see time scale, -scale investment assets, 339

J. P. Morgan, 6

kernels, 52

Kronecker symbol, 260 kurtosis, 134. 205 operator, 71

lagged correlation, 211 lead-lag, 20

lead-lag correlation, 211 leptokurticity, 173 LIBOR, 25 LIFFE, 24,31 likelihood

likelihood-ratio test, 230

log-likelihood, 222

maximum likelihood, 223, 330 Ljung-Box, 334 long memory, 8, 198, 207 long-term regime, 259

mapping function, 261 mark-to-markct, 305 market

Asian stock, 52 bond,28 centralized, 11 decentralized (OTC), 11 derivative, 11 equity, 32 Eurofutures, 169 Eurodollar, 169 Eurolira, 24, 169 Euromark, 169 Euroyen, 24

Short Sterling, 169 foreign exchange (FX), 11,13

FX forward, 15

FX forwards, 14

FX futures, 14

FX spot, 13, 15 futures, 11,12

bond futures, 28

commodity futures, 31

Eurofutures, 24

individual equity futures, 33 geographical market, 214 German bond market, 131 heterogeneous market, 210 holidays, 190 homogeneous market, 210 interest rate futures, 23, 25 liquid, I

market microstructure, 5 opening hours, 176 option, 11, 13, 33

over-the-counter (OTC), 2, 12, 19, 21, 24 over-the-counter interest rate, 23 participants, 10

anonymity, 10 spot, 11, 12 spot interest rate, 24 U.S. treasury bond market, 131

market activity, 175, 177, 183

market efficiency, 14, 45, 156, 249, see efficient markets

market expectation, 130

market makers, 19

market microstructure effect, 197, 201 market risk, 158

market-dependent persistence, 206 Markov chain, 233 maturity, 22

maximum likelihood, see likelihood

mean absolute error (MAE), 262

mean square error (MSE), 262

mean squared prediction errors (MSPE), 295

measure

asymmetric effective returns, 307 reward-to-variability ratio, 305 risk-sensitive performance, 304 symmetric effective returns, 305 method

distribution free measure, 262 interpolation, 37

linear, 54

previous-tick, 37 nonparametric method, 262 overlapping, 44 panel regression, 47

polynomial, 25

polynomial interpolation, 26 microstructure, 2, 5, 14 Middle European Time (MET), 326 middle price, 122 misspecification, 222 mixture of distributions, 131 model

ARCH, 221

capital asset pricing model (CAPM), 349 EMA-HARCH, 237, 254 FIGARCH, 221,231 GARCH, 44, 146, 221, 222, 224, 328

AR-GARCH, 328

diffusion process, 224

estimation problems, 226

jump process, 224

temporal aggregation, 224 HARCH, 146, 231,335

AR-HARCH, 328

HARCH components, 236 IGARCH, 251 in-sample optimization, 263 intraweek market activity, 179 lagged adjustment model, 124 macroeconomic, 5 market activity, 175, 183 market maker bias, 154 market microstructure, 14 model initialization, 263 model structure, 256 moving average model, 295 multi-horizon, 263 multicascade model, 148 multifractal model, 148 multivariate volatility model, 250 nonparametric conditional mean models, 295

Normal Inverse Gaussian (NIG) Levy process, 151 out-of-sample test, 263 purchasing power parity model, 249 QARCH, 232

random walk, 54, 147, 150, 152, 253, 331

risk premia, 249

structural model, 249

time series model, 249

trading, see trading model

trading model, 295

volatility, 6 moment, 55, 132, 135, 137

finite second moment, 142

nonconverging fourth moment, 142 momenta, 257

Monte Carlo simulations, 145