Financial Times FT.com

Algorithmic trades heighten volatility

By Anuj Gangahar in New York

Published: December 4 2008 22:41 | Last updated: December 4 2008 22:41

The growing use of new types of computer models that react more quickly to the latest moves in prices is exacerbating the historically high levels of volatility in equity markets, according to traders.

Such “aggressive” algorithms that are based on the most up-to-date price data – often for just the previous hour or day on a particular stock – have replaced models using longer term valuation methods and historical data going back 10 years or more.

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