Related papers: How markets slowly digest changes in supply and de…
We revisit the "epsilon-intelligence" model of Toth et al.(2011), that was proposed as a minimal framework to understand the square-root dependence of the impact of meta-orders on volume in financial markets. The basic idea is that most of…
We address the question of how stock prices respond to changes in demand. We quantify the relations between price change $G$ over a time interval $\Delta t$ and two different measures of demand fluctuations: (a) $\Phi$, defined as the…
Although behavioral economics has demonstrated that there are many situations where rational choice is a poor empirical model, it has so far failed to provide quantitative models of economic problems such as price formation. We make a step…
We consider a simple model for the evolution of a limit order book in which limit orders of unit size arrive according to independent Poisson processes. The frequencies of buy limit orders below a given price level, respectively sell limit…
We discuss the stationary states of a model economy in which $N$ heterogeneous adaptive consumers purchase commodity bundles repeatedly from $P$ sellers. The system undergoes a transition from an inefficient to an efficient state as the…
In this study, we introduce a physical model inspired by statistical physics for predicting price volatility and expected returns by leveraging Level 3 order book data. By drawing parallels between orders in the limit order book and…
We introduce a stochastic heterogeneous interacting-agent model for the short-time non-equilibrium evolution of excess demand and price in a stylized asset market. We consider a combination of social interaction within peer groups and…
We extend a linear version of the liquidity risk model of Cetin et al. (2004) to allow for price impacts. We show that the impact of a market order on prices depends on the size of the transaction and the level of liquidity. We obtain a…
The disbalance of Supply and Demand is typically considered as the driving force of the markets. However, the measurement or estimation of Supply and Demand at price different from the execution price is not possible even after the…
Microstructure of market dynamics is studied through analysis of tick price data. Linear trend is introduced as a tool for such analysis. Trend arbitrage inequality is developed and tested. The inequality sets limiting relationship between…
The goal of developing a firmer theoretical understanding of inhomogenous temporal processes -- in particular, the waiting times in some collective dynamical system -- is attracting significant interest among physicists. Quantifying the…
Motivated by the practical challenge in monitoring the performance of a large number of algorithmic trading orders, this paper provides a methodology that leads to automatic discovery of the causes that lie behind a poor trading…
The basis of arbitrage methods depends on the circulation of information within the framework of the financial market. Following the work of Modigliani and Miller, it has become a vital part of discussions related to the study of financial…
We propose a non-linear observation-driven version of the Hasbrouck (1991) model for dynamically estimating trades' market impact and information content. We find that market impact displays an intraday pattern superimposed with large…
We present a model of financial markets originally proposed for a turbulent flow, as a dynamic basis of its intermittent behavior. Time evolution of the price change is assumed to be described by Brownian motion in a power-law potential,…
This paper deals with a fundamental subject that has seldom been addressed in recent years, that of market impact in the options market. Our analysis is based on a proprietary database of metaorders-large orders that are split into smaller…
We introduce a mathematical model on the dynamics of demand and supply incorporating collectability and saturation factors. Our analysis shows that when the fluctuation of the determinants of demand and supply is strong enough, there is…
In this paper we study the price dynamics in a simple model of financial markets with heterogeneous agents. We concentrate on how increases in the total number of active traders influences fluctuations of asset prices. We find that a…
We study the problem of the execution of a moderate size order in an illiquid market within the framework of a solvable Markovian model. We suppose that in order to avoid impact costs, a trader decides to execute her order through a unique…
In this paper, we conduct a systematic large-scale analysis of order book-driven predictability in high-frequency returns by leveraging deep learning techniques. First, we introduce a new and robust representation of the order book, the…