A characterisation of cross-impact kernels
Trading and Market Microstructure
2021-07-20 v1 Mathematical Finance
Statistical Finance
Abstract
Trading a financial asset pushes its price as well as the prices of other assets, a phenomenon known as cross-impact. We consider a general class of kernel-based cross-impact models and investigate suitable parameterisations for trading purposes. We focus on kernels that guarantee that prices are martingales and anticipate future order flow (martingale-admissible kernels) and those that ensure there is no possible price manipulation (no-statistical-arbitrage-admissible kernels). We determine the overlap between these two classes and provide formulas for calibration of cross-impact kernels on data. We illustrate our results using SP500 futures data.
Cite
@article{arxiv.2107.08684,
title = {A characterisation of cross-impact kernels},
author = {Mathieu Rosenbaum and Mehdi Tomas},
journal= {arXiv preprint arXiv:2107.08684},
year = {2021}
}