Related papers: Measuring market liquidity: An introductory survey
We consider an agent who needs to buy (or sell) a relatively small amount of asset over some fixed short time interval. We work at the highest frequency meaning that we wish to find the optimal tactic to execute our quantity using limit…
Many commonly used liquidity measures are based on snapshots of the state of the limit order book (LOB) and can thus only provide information about instantaneous liquidity, and not regarding the local liquidity regime. However, trading in…
In this research, we have empirically investigated the key drivers affecting liquidity in equity markets. We illustrated how theoretical models, such as Kyle's model, of agents' interplay in the financial markets, are aligned with the…
We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated…
We contrast Arbitrage Pricing Theory (APT), the theoretical basis for the development of financial instruments, with a dynamical picture of an interacting market, in a simple setting. The proliferation of financial instruments apparently…
With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the agent minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time,…
We derive the arbitrage gains or, equivalently, Loss Versus Rebalancing (LVR) for arbitrage between \textit{two imperfectly liquid} markets, extending prior work that assumes the existence of an infinitely liquid reference market. Our…
Securities lending is an important part of the financial market structure, where agent lenders help long term institutional investors to lend out their securities to short sellers in exchange for a lending fee. Agent lenders within the…
We propose in this paper to consider the stock market as a physical system assimilate to a fluid evolving in a macroscopic space subject to a Force that influences its movement over time where this last is arising from the collision between…
An open market is a subset of an entire equity market composed of a certain fixed number of top capitalization stocks. Though the number of stocks in the open market is fixed, the constituents of the market change over time as each…
A financial market is a system resulting from the complex interaction between participants in a closed economy. We propose a minimal microscopic model of the financial market economy based on the real economy's symmetry constraint and…
The standard approach for compensating liquidity providers on many decentralized exchanges (DEX) for serving as counter-party to swaps is through charging a small percentage of fees. The expected payoff from the cash flow of this mode of…
This paper is about our attempt of identifying trade elasticities through the variations in the exchange rate, for possible applications to the case of services whose physical transactions are veiled in the trade statistics. The regression…
We present results of numerical analysis of several simple models for the microstructure of a double auction market without intermediaries which were introduced in cond-mat/9808240. We perform computer simulations of the minimal model in…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
The information released to investors in financial markets has various forms. We refer to range information as information about the upper and lower bound which the payoff of a risky asset may reach in the future. This study develops…
A stock market is called diverse if no stock can dominate the market in terms of relative capitalization. On one hand, this natural property leads to arbitrage in diffusion models under mild assumptions. On the other hand, it is also easy…
This paper presents a new interacting particle system and uses it as a spin model for financial market microstructure. The asymptotic analysis of this stochastic process exhibits a lower bound to the contemporaneous measurement of price and…
The possibility of statistical evaluation of the market completeness and incompleteness is investigated for continuous time diffusion stock market models. It is known that the market completeness is not a robust property: small random…
We develop a liquidity-sensitive multivariate volatility framework to improve the estimation of time-varying covariance structures under market frictions. We introduce two novel portfolio-level liquidity measures, liquidity jump and…