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High Frequency Trading, a Boon or a Threat?

Is High Frequency Trading (HFT) bringing liquidity to the market as many think? Or, does it pose a threat to the stability of the system with the development of flash crashes? Prof. Dr. Michel Dacorogna, partner at the actuarial consulting company PRS Prime Re Solutions in Baar, Switzerland, published a paper on HFT. In this paper, he reviews some of the advances that high frequency data have brought to light and the approach that has been developed over the years to understand the dynamics of financial markets. He then wonders about the role of HFT in the functioning of financial markets and answers the questions asked at the outset by distinguishing two sorts of mutually interacting HFT: the strategic and the informed trading.

Read the full paper here.

Read more publications here.

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