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Finding informed traders in futures and their inderlying assets in intraday trading

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  • Lyudmila A. Glik
  • Oleg L. Kritski
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    Abstract

    We propose a mathematical procedure for finding informed traders in ultra-high frequency trading. We wrote it as Vector ARMA and found condition of its stationarity. For the price exposure complied with ARMA(1,2) we proved that underlying asset price difference can be derived as ARMA(1,1) process. For validation of the model, we test an influence of informed traders in EUR/USD, GBP/USD, USD/RUB pairs and futures, in gold and futures prices, in Russian Trade System share index (RTS) and futures trading. We found some evidence of such influence in gold and currency pair USD/RUB pricing, in RTS index in the period from Dec 16 till Dec 20, 2013 and from Jan 28 till Jan 30.

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    File URL: http://arxiv.org/pdf/1402.6583
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    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number 1402.6583.

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    Date of creation: Feb 2014
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    Handle: RePEc:arx:papers:1402.6583

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    1. Vitale, Paolo, 2012. "Risk-averse insider trading in multi-asset sequential auction markets," Economics Letters, Elsevier, vol. 117(3), pages 673-675.
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    11. Hu, Jianfeng, 2014. "Does option trading convey stock price information?," Journal of Financial Economics, Elsevier, vol. 111(3), pages 625-645.
    12. Park, Young S. & Lee, Jaehyun, 2010. "Detecting insider trading: The theory and validation in Korea Exchange," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2110-2120, September.
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    14. Muravyev, Dmitriy & Pearson, Neil D. & Paul Broussard, John, 2013. "Is there price discovery in equity options?," Journal of Financial Economics, Elsevier, vol. 107(2), pages 259-283.
    15. Apergis, Nicholas, 2014. "Can gold prices forecast the Australian dollar movements?," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 75-82.
    16. Zhou, Deqing, 2012. "Overconfidence, public disclosure and long-lived information," Economics Letters, Elsevier, vol. 116(3), pages 626-630.
    17. Grégoire, Philippe & Huang, Hui, 2012. "Information disclosure with leakages," Economic Modelling, Elsevier, vol. 29(5), pages 2005-2010.
    18. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
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