The Average Time Between Trades for a High-Frequency Trading Investment

question 100

Multiple Choice

The average time between trades for a high-frequency trading investment firm is 40 seconds. Assume the time between trades is exponentially distributed. What is the probability that the time between trades for a randomly selected trade and the one proceeding it is more than a minute?

• A) 0.2231
• B) 0.4869
• C) 0.5134
• D) 0.7769

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Definitions:

Incremental Net

The net change in financial outcomes resulting from a particular decision or action, considering only the relevant costs and benefits.

Useful Life

Useful life is the estimated time period that an asset is expected to be useful for the operations of a business before it is fully depreciated.

Profitability Index

A financial tool used to determine the desirability of an investment or project, calculated as the present value of future cash flows divided by the initial investment.

Present Value

The present value of a future amount of money or series of payments, calculated based on a certain rate of return.