Related papers: Permanent market impact can be nonlinear

One of the most important empirical findings in microeconometrics is the pervasiveness of heterogeneity in economic behaviour (cf. Heckman 2001). This paper shows that cumulative distribution functions and quantiles of the nonparametric…

This paper presents a stochastic model for discrete-time trading in financial markets where trading costs are given by convex cost functions and portfolios are constrained by convex sets. The model does not assume the existence of a cash…

We study contingent claims in a discrete-time market model where trading costs are given by convex functions and portfolios are constrained by convex sets. In addition to classical frictionless markets and markets with transaction costs or…

We study a single risky financial asset model subject to price impact and transaction cost over an infinite horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in fixed…

Bielecki and Rutkowski (2014) introduced and studied a generic nonlinear market model, which includes several risky assets, multiple funding accounts and margin accounts. In this paper, we examine the pricing and hedging of contract both…

We present a study of price impact in the over-the-counter credit index market, where no limit order book is used. Contracts are traded via dealers, that compete for the orders of clients. Despite this distinct microstructure, we…

We develop from basic economic principles a continuous-time model for a large investor who trades with a finite number of market makers at their utility indifference prices. In this model, the market makers compete with their quotes for the…

Traditional electric energy markets do not explicitly model generator contingencies. To improve the representation of resources and to enhance the modeling of uncertainty, existing markets are moving in the direction of including generator…

We study a discrete-time financial market with a single constrained trader, competitive market makers, and noise traders. Within the class of linear equilibria, the equilibrium structure is shown to be uniquely determined by two state…

Financial markets are a typical example of complex systems where interactions between constituents lead to many remarkable features. Here, we show that a pairwise maximum entropy model (or auto-logistic model) is able to describe switches…

Empirical evidence suggests that even the most competitive markets are not strictly efficient. Price histories can be used to predict near future returns with a probability better than random chance. Many markets can be considered as {\it…

This paper was prepared as a comment on "Dynamic Causal Effects in a Nonlinear World: the Good, the Bad, and the Ugly" by Michal Koles\'{a}r and Mikkel Plagborg-M{\o}ller. We make three comments, including a novel contribution to the…

Our goal in this paper is to study the market impact in a market in which the order flow is autocorrelated. We build a model which explains qualitatively and quantitatively the empirical facts observed so far concerning market impact. We…

Generalized linear models are flexible tools for the analysis of diverse datasets, but the classical formulation requires that the parametric component is correctly specified and the data contain no atypical observations. To address these…

Difficulties may arise when analyzing longitudinal data using mixed-effects models if there are nonparametric functions present in the linear predictor component. This study extends the use of semiparametric mixed-effects modeling in cases…

Fixed effect estimators of nonlinear panel data models suffer from the incidental parameter problem. This leads to two undesirable consequences in applied research: (1) point estimates are subject to large biases, and (2) confidence…

Trend and Value are pervasive anomalies, common to all financial markets. We address the problem of their co-existence and interaction within the framework of Heterogeneous Agent Based Models (HABM). More specifically, we extend the…

Mediation analysis is concerned with the decomposition of the total effect of an exposure on an outcome into the indirect effect through a given mediator, and the remaining direct effect. This is ideally done using longitudinal measurements…

We examine optimal execution models that take into account both market microstructure impact and informational costs. Informational footprint is related to order flow and is represented by the trader's influence on the flow imbalance…

We discuss martingales, detrending data, and the efficient market hypothesis for stochastic processes x(t) with arbitrary diffusion coefficients D(x,t). Beginning with x-independent drift coefficients R(t) we show that Martingale stochastic…