Analysis Of Inventory Cost On High Frequency Trading Strategy

This paper mainly studies the impact of inventory cost on HTF High Frequency Trade market maker's optimal trading.Firstly,the dynamic programming model is es-tablished,and the dynamic programming principle is used to obtain the optimal trading strategy of the HFT market maker,and then the influence of the inventory cost on the HFT optimal trading strategy is studied.Finally,the numerical simulation is carried out by MATLAB to verify the theoretical properties of the previous dynamic program-ming model,and to increase the market supply and demand and liquidity to HFT The influence of market maker's optimal trading strategy.The research shows that:HFT market makers adjust the inventory very quickly,hold high inventory in the early stage,adjust the inventory level to close to zero in the middle and late period,and the cost of inventory is increased,the more rapid the regulation is;As the trading time approaches the end of transaction,the area of the double trading of the market maker is gradually reduced,and the optimal purchase is to be bought.The price changes are becoming more and more intense,in which the optimal sale price at all times,the bilateral transac-tion area on the decrease of inventory cost,the intensity of the optimal price change,the maximum sale difference about the cost of inventory,the final profit is not significantly affected by the inventory cost;with the increase of supply and demand and liquidity of the market,the optimal purchase is made.Price changes are more intense,the biggest difference in price increases,holding higher inventory in the early stage,and finally a significant increase in profits.