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Would Position Limits Have Made Any Difference To The 'Flash Crash' On May 6, 2010, Wing Bernard Lee, Shih-Fen Cheng, Annie Koh
Would Position Limits Have Made Any Difference To The 'Flash Crash' On May 6, 2010, Wing Bernard Lee, Shih-Fen Cheng, Annie Koh
Research Collection School Of Computing and Information Systems
On May 6, 2010, the US equity markets experienced a brief but highly unusual drop in prices across a number of stocks and indices. The Dow Jones Industrial Average (DJIA) fell by approximately 9% in a matter of minutes, and several stocks were traded down sharply before recovering a short time later. Earlier research by Lee, Cheng and Koh (2010) identified the conditions under which a “flash crash” can be triggered by systematic traders running highly similar trading strategies, especially when they are “crowding out” other liquidity providers in the market. The authors contend that the events of May 6, …
An Analysis Of Extreme Price Shocks And Illiquidity Among Trend Followers, Bernard Lee, Shih-Fen Cheng, Annie Koh
An Analysis Of Extreme Price Shocks And Illiquidity Among Trend Followers, Bernard Lee, Shih-Fen Cheng, Annie Koh
Research Collection School Of Computing and Information Systems
We construct an agent-based model to study the interplay between extreme price shocks and illiquidity in the presence of systematic traders known as trend followers. The agent-based approach is particularly attractive in modeling commodity markets because the approach allows for the explicit modeling of production, capacities, and storage constraints. Our study begins by using the price stream from a market simulation involving human participants and studies the behavior of various trend-following strategies, assuming initially that their participation will not impact the market. We notice an incremental deterioration in strategy performance as and when strategies deviate further and further from the …
Operational Risk In Trading Platforms, M. Thulasidas
Operational Risk In Trading Platforms, M. Thulasidas
Research Collection School Of Computing and Information Systems
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events. A trading platform is a system, and therefore comes under the umbrella definition of operational risk.