### Order Book Based HFT Trading for NSE India

Introduction Classic asset pricing theory assumes prices will eventually adjust to and reflect the fair value,the route and speed of transition is not specified. Market Microstructure studies how prices adjust to reflect new…

Algo trading India

http://algotradingindia.blogspot.com/2011/11/order-book-based-hft-trading-for-nse.html

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Probably will not work for Indian market

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Its allready tested on indian market

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I suspect these models since I believe these models lack measurement of bias introduced due to the order book at any given moment. I strongly believe that the order book is a good measure of information parity. This has to be resolved through the schrodinger model is what I feel.

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Of course it can be tested :). Simulation is usually biased (usually with edge clearing probability) if the data are very discrete

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which model of Schrodinger are u referring to ?

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To just to introduce every body I am attaching 2 links here which explain in basic about the owrks of schrodinger

http://en.wikipedia.org/wiki/Schr%C3%B6dinger’s_cathttp://en.wikipedia.org/wiki/Schr%C3%B6dinger_equation

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I was suspecting you would say that. But this is like saying that you need a nuclear furnace to cook a family lunch.

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This is famous Schrodinger cat problem – No idea how to use this for order book. Any paper on this?

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What model you look at does not really matter what really matters is at some point of time there is the availabilty of information which is completely opposite to each other.

The buyer has a different information and the seller has a different information. Over here we need to discount the genuine seller who is selling due to some other compulsions rather than the information available to him.

In such fuzzy scenario you need to go to analyse the uncertanity and address the disparity of information through some model.

I am just propsing this model to start thinking that there can be answers to this problem somewhere else

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What you say is completely right except that you attached the Schrodinger thing into it. If you assume the market to be a data generator and the data we get as a representation, what you are suggesting is that there IS a way to decode the function generator using the data at hand, I tend to believe that 50% of the function can be decoded and 50% has to be judged empirically. This is because the markets have a feedback mechanism and when that is there you do not know when is the data representing the original function value and when is it representing the feedback value.

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I tend to agree. what I am implyig that can we start thinking of quanitifying the levels of uncertainty at any given point of time. The effect of “trade” on the order book needs to be thought of and change in the uncertainity to be quantified.

As far as schrodinger goes the situation is very similar.

At the start of trading there is only order book.

Now how does the order book takes place ? It is the expectancy of some event occuring based on the information available. This can be treated as closed box to start with. Now as soon as the orders are placed the information available changes drastically on the basis of which there is a change in order book and trade takes place. The occurance of trade further increases the information available and order book gets modified.

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again i still don’t understand how can Mr. Schrodinger contribute to the abovesaid phenomenon which has been acknowledged for a long time now among traders. To be precise, how has the Schrodinger Cat phenomenon added a new perspective to this already established behavior of order books ?

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