A New Approach to Investment Risk Assessment in HFT Systems

Investment risk assessment in case of using HFT systems is a complicated and significant issue. The size of a single HFT transaction is decided based on the investor's capital and their preferences regarding possible risk. Techniques of measuring risk that are most popular among investors using HFT systems usually include analysing the return rate and the loss in capital (e.g. Calmar's indicator). Yet, those kind of techniques use only the results of an econometric analysis, realized based on historical data from a given time period. In the following article we propose a new approach, consisting in a proper extrapolation of capital increase function and the maximal drawdown increase function. This approach allows for an assessment of the change character of parameters over time, and, in consequence, for a more precise analysis of the risk undertaken by investors using HFT systems.