Related papers: Price Impact
Market impact is an important problem faced by large institutional investor and active market participant. In this paper, we rigorously investigate whether price trajectory data from the metaorder increases the efficiency of estimation,…
This paper aims to provide a practical example on the assessment and propagation of input uncertainty for option pricing when using tree-based methods. Input uncertainty is propagated into output uncertainty, reflecting that option prices…
The price of electricity is far more volatile than that of other commodities normally noted for extreme volatility. Demand and supply are balanced on a knife-edge because electric power cannot be economically stored, end user demand is…
Pricing decisions of companies require an understanding of the causal effect of a price change on the demand. When real-life pricing experiments are infeasible, data-driven decision-making must be based on alternative data sources such as…
We make an extensive empirical study of the market impact of large orders (metaorders) executed in the U.S. equity market between 2007 and 2009. We show that the square root market impact formula, which is widely used in the industry and…
We present a set of models of the main stylized facts of market price fluctuations. These models comprise dynamical evolution with threshold dynamics and Langevin price equation with multiplicative noise, percolation models to describe the…
We seek to utilize the nonextensive statistics to the microscopic modeling of the interacting many-investor dynamics that drive the price changes in a market. The statistics of price changes are known to be fit well by the Students-T and…
We solve in closed-form an equilibrium model in which a finite number of exponential investors continuously consume and trade with price-impact. Compared to the analogous Pareto-efficient equilibrium model, price-impact has an amplification…
We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent…
Financial models do not merely analyse markets, but actively shape them. This effect, known as performativity, describes how financial theories and the subsequent actions based on them influence market processes, by creating self-fulfilling…
Trading frictions are stochastic. They are, moreover, in many instances fast-mean reverting. Here, we study how to optimally trade in a market with stochastic price impact and study approximations to the resulting optimal control problem…
Price without transaction makes no sense. Trading volume authenticates its corresponding price, so there exist mutual information and correlation between price and trading volume. We are curious about fractal features of this correlation…
The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new models for option pricing for informed traders in complete…
Argumentation is a formalism allowing to reason with contradictory information by modeling arguments and their interactions. There are now an increasing number of gradual semantics and impact measures that have emerged to facilitate the…
This paper proposes a theory of pricing premised upon the assumptions that customers dislike unfair prices---those marked up steeply over cost---and that firms take these concerns into account when setting prices. Since they do not observe…
Empirical evidence suggests that there is little to no correlation between the rate of inflation and the size of price change. Economists have hitherto taken this to mean that monetary shocks do not generate much deviation in relative…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
This paper studies the switching of trading strategies and its effect on the market volatility in a continuous double auction market. We describe the behavior when some uninformed agents, who we call switchers, decide whether or not to pay…
Price dynamics is analyzed in terms of a model which includes the possibility of effective forces due to trend followers or trend adverse strategies. The method is tested on the data of a minority-majority model and indeed it is capable of…
A tick size is the smallest increment of a security price. It is clear that at the shortest time scale on which individual orders are placed the tick size has a major role which affects where limit orders can be placed, the bid-ask spread,…