Anomalous impact in reaction-diffusion models
Statistical Mechanics
2015-01-07 v1 Trading and Market Microstructure
Abstract
We generalize the reaction-diffusion model A + B -> 0 in order to study the impact of an excess of A (or B) at the reaction front. We provide an exact solution of the model, which shows that linear response breaks down: the average displacement of the reaction front grows as the square-root of the imbalance. We argue that this model provides a highly simplified but generic framework to understand the square-root impact of large orders in financial markets.
Keywords
Cite
@article{arxiv.1403.3571,
title = {Anomalous impact in reaction-diffusion models},
author = {Iacopo Mastromatteo and Bence Toth and Jean-Philippe Bouchaud},
journal= {arXiv preprint arXiv:1403.3571},
year = {2015}
}
Comments
5 pages, 2 figures