High frequency trading and standard asset pricing models

Robert Jarrow ()

Finance Research Letters, 2022, vol. 49, issue C

Abstract: This paper shows how to include high frequency (HF) traders into standard continuous-time, frictionless and competitive asset pricing models. For derivative pricing models, the standard methodologies apply unaltered, except that the interpretation of the exogenous price process changes. For equilibrium models, after the inclusion, the standard models also still apply, but the equilibrium return process and risk premium change to reflect the HF traders’ trades.

Keywords: High frequency traders; Asset pricing models; Derivative pricing models; No-arbitrage; Equilibrium (search for similar items in EconPapers)
JEL-codes: D5 G1 G11 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:49:y:2022:i:c:s1544612322003439

DOI: 10.1016/j.frl.2022.103119

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