Related papers: Permanent market impact can be nonlinear
Although both data availability and the demand for accurate forecasts are increasing, collaboration between stakeholders is often constrained by data ownership and competitive interests. In contrast to recent proposals within cooperative…
Financial markets are often modelled as if time were unique and continuous across assets and markets. Financial markets are however asynchronous, order flow is event-driven, and waiting times between events are often random. Many of the…
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…
The indirect transactions between sectors of an economic system has been a long-standing open problem. There have been numerous attempts to conceptually define and mathematically formulate this notion in various other scientific fields in…
In this paper, we assume that the permanent market impact of metaorders is linear and that the price is a martingale. Those two hypotheses enable us to derive the evolution of the price from the dynamics of the flow of market orders. For…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
We investigate the well-posedness in the Hadamard sense and the absence of price manipulation in the optimal execution problem within the Almgren-Chriss framework, where the temporary and permanent impact parameters vary deterministically…
The article is an empirical study of market impact through order book events. It describes a mechanism of extracting an average participation rate and a market impact of small orders which represent individual slices of large metaorders.…
We study linear panel regression models in which the unobserved error term is an unknown smooth function of two-way unobserved fixed effects. In standard additive or interactive fixed effect models the individual specific and time specific…
We study overpricing in a repeated game between two representative agents: a market maker, who controls market liquidity, and a market taker, who chooses trade quantities. Market prices evolve through the endogenous price impact of trades…
We consider a model for linear transient price impact for multiple assets that takes cross-asset impact into account. Our main goal is to single out properties that need to be imposed on the decay kernel so that the model admits…
The main focus of this work is to understand the dynamics of non regulated markets. The present model can describe the dynamics of any market where the pricing is based on supply and demand. It will be applied here, as an example, for the…
We develop a general framework for the identification of counterfactual parameters in a class of nonlinear semiparametric panel models with fixed effects and time effects. Our method applies to models for discrete outcomes (e.g., two-way…
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…
For a market impact model, price manipulation and related notions play a role that is similar to the role of arbitrage in a derivatives pricing model. Here, we give a systematic investigation into such regularity issues when orders can be…
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…
We study the role and drivers of persistence in the extensive margin of bilateral trade. Motivated by a stylized heterogeneous firms model of international trade with market entry costs, we consider dynamic three-way fixed effects binary…
We consider an optimal trading problem under a market impact model with endogenous market resistance generated by a sophisticated trader who (partially) detects metaorders and trades against them to exploit price overreactions induced by…
We study portfolio selection in a model with both temporary and transient price impact introduced by Garleanu and Pedersen (2016). In the large-liquidity limit where both frictions are small, we derive explicit formulas for the…
Classic market design theory is rooted in static models where all participants trade simultaneously. In contrast, modern platform-mediated digital markets are fundamentally dynamic, defined by the asynchronous and stochastic arrival of…