Frank J . Fabozzi , Sergio M . Focardi , and Caroline Jonas * HIGH - FREQUENCY TRADING : METHODOLOGIES AND MARKET IMPACT

requisite input, high-frequency data (HFD), and the impact of HFT on financial markets. The econometrics of HFD and trading marks a significant departure from the econometrics used when dealing with lower frequencies. In particular, ultra HFD might be randomly spaced, requiring point process techniques, while quantities such as volatility become nearly observable with HFD. At high frequency, forecasting opportunities that are different from those present at lower frequencies appear, calling for new strategies and a new generation of trading algorithms. New risks associated with the speed of HFT emerge. The notion of interaction between algorithms becomes critical, requiring the careful design of electronic markets.