SEC and CFTC reports estimate that High Frequency strategies
are responsible for about 60% of all transactions on U.S. shares. In
Europe, this percentage is around 40% and growing.
High Frequency strategies are those characterized by a brief
holding period, which can range from a split second to a few
hours. This enables traders to place numerous independent bets
per day on an instrument or portfolio, profiting from the
multiplicative effect postulated by the Fundamental Law of
Active Management. The goal is to exploit inefficiencies derived
from the market’s microstructure (rigidities, agents’ idiosyncrasies,
asymmetric information, etc.).
The generalization of electronic markets and ubiquitous automation of financial transactions has rendered many established
models and theories obsolete. The objective of this work is to
present a new scientific framework for the study of some of the
most relevant questions concerning High Frequency.
