Market prices are traditionally sampled in fixed time-intervals to form time series. Directional change (DC) is an alternative approach to record price movements. DC is data-driven: price changes dictate when a price is sampled and recorded. DC allows us to observe features in data that may not be observable in time series. Time series and DC-based summaries should complement each other: they allow us to see data from two different angles (like seeing things with two eyes instead of one). Our research agenda is to develop ways under DC to turn data into information, knowledge and applications.Computational Finance and Economics Laboratory | PPT Presentation | Sponsor:
History is recorded by key events. For example, when we describe the development of currencies in the last century, we report when they untied with gold, when they floated against each other, etc. We don't take snapshots at fixed intervals: that is, we don't report the situations at the end of every year or every 10 years.
Yet, when we describe price movements in financial markets, we tend to use snapshots taken at fixed intervals. First we decide how often we sample the data. Then we take snapshots at the frequency that we have chosen. These snapshots form an interval-based summary. For example, end of day prices are frequently used.
Snapshots at fixed intervals are problematic. For example, if we record the end of day prices only, we wouldn't have noticed the flash crash on 6 May 2010. This motivated Richard Olsen to invent Directional Changes as a new way of summarising price movements.
A directional change is defined by a threshold that the observer cares about, e.g. 5%. Suppose we want to summarise the series shown here with 5% directional changes. We look for extreme points from which price dropped or rose by 5% or more.
History is recorded by significant events. So should price movements. The advantage of using Directional Changes for price summaries is that it captures significant points in price movements. It would have captured the significant points during the 2010 flash crash.
This new concept provides traders with new perspectives to price movements (as demonstrated by Olsen Ltd in foreign exchange trading). This new concept has enabled researchers to discover new regularities in markets which cannot be captured by interval-based summaries. Such newly observed regularities give rise to new opportunities. As a new concept, directional changes open a rich research area waiting to be explored. Tsang 2021 argued that directional change is particularly useful for handling tick-to-tick data.
|Hvozdyk, Lyudmyla (PhD)||Jumps in intraday data||Advisor to Shengnan Li|
|Li, Shengnan||DC-based Head and Shoulder trading, Relative Volatility between two markets, Jumps||MSc by research followed by PhD, CCFEA, (2015.10-)|
|Alkhamees, Nora||DC-based event identification||PhD project, IADS, (2015.10-2019)|
|Golub, Anton||DC Stylized facts, algorithmic trading||PhD, flov technologies and Lykke, (2014?-)|
|KAMPOURIDIS, Michael (PhD)||Algorithmic trading||University of Essex|
|SUN, Jianyong (PhD)||Overshoot analysis||ex-CSEE, University of Essex|
|PANIANGTONG, Sanhanat||Algorithmic trading||MSc student (2014-15)|
|SERGUIEVA, Antoaneta (PhD)||DC-profiling, high-frequency data||UCL Financial Computing and Analytics|
|GAO, Jing||DC-profiling||Beihang University / Visiting Scholar (2014-2015)|
|TAO, Ran (PhD)||DC-profiling: vocabulary and comparison||PhD project, CCFEA, (2014.01-2018)|
|CHEN, Jun, James||DC-profiling: Regime shift||PhD project, CCFEA, (2015.01-2019.10.30)|
|MA, Shuai (Martin)||DC-based market tracking and Nowcasting||Visiting scholar, CCFEA, (2014.12-2015.02) / PhD project (2015.10.01-2022.03)|
|AO, Han (PhD)||Forecasting DCs and algorithmic trading||PhD project, CCFEA, (2012.10-2018)|
|BAKHACH, Amer (PhD)||Forecasting DCs and algorithmic trading||PhD project, CCFEA, (2014.01-2018)|
|YE, Alan||Algorithmic trading||PhD project, Greenwich University (2013.10-)|
|CHINTHALAPATI, Raju Venkata (PhD)||Algorithmic trading||Business School, Greenwich University|
|AL OUD, Monira (PhD)||Agent-based stylized facts in the FX market||PhD project, CSEE, (2009-2012)|
|MASRY, Shaimaa (PhD)||Event-Based Microscopic Analysis of the FX Market||PhD project, CCFEA, (2008-2013)|
|QI, Maggie (PhD)||Risk measurement with high-frequency data||PhD project, CCFEA, (2006[?]-2012)|
|TSANG, Edward (PhD)||DC-profiling, forecasting and algorithmic trading||CCFEA|
|OLSEN, Richard (PhD)||Scaling laws||Founder of OANDA and Olsen Ltd|
This is part of the High-Frequency Finance Project. Some of the works decribed below were presented in the HFF Workshop 2016.This page is maintained by: Edward Tsang; created: 2016.11.22; last update 2022.03.16