Month: October 2015

High Frequency Market Microstructure: Part 1 (Microstructure Noise)

Market Microstructure Noise¶ Microstructure noise describes price deviation from its fundamental value induced by certain features of the market under consideration. Common sources of microstructure noise are: bid-ask bounce effect order arrival latency asymmetry of information discreteness of price changes Noise makes high frequency estimates of some parameters (e.g. realized volatility) very unstable. The situation […]