Related papers: Deviations in expected price impact for small tran…
Online marketplace designers frequently run A/B tests to measure the impact of proposed product changes. However, given that marketplaces are inherently connected, total average treatment effect estimates obtained through Bernoulli…
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…
Buying and selling stocks causes price changes, which are described by the price impact function. To explain the shape of this function, we study the Island ECN orderbook. In addition to transaction data, the orderbook contains information…
Equity options are known to be notoriously difficult to price accurately, and even with the development of established mathematical models there are many assumptions that must be made about the underlying processes driving market movements.…
We analyze large stock price changes of more than five standard deviations for i) TAQ data for the year 1997 and ii) order book data from the Island ECN for the year 2002. We argue that large price changes are not due to large trading…
Devising models of the limit order book that realistically reproduce the market response to exogenous trades is extremely challenging and fundamental in order to test trading strategies. We propose a novel explainable model for small tick…
Trading a financial asset pushes its price as well as the prices of other assets, a phenomenon known as cross-impact. The empirical estimation of this effect on complex financial instruments, such as derivatives, is an open problem. To…
We study the dynamics of the limit order book of liquid stocks after experiencing large intra-day price changes. In the data we find large variations in several microscopical measures, e.g., the volatility the bid-ask spread, the bid-ask…
In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…
Statistical properties of an order book and the effect they have on price dynamics were studied using the high-frequency NASDAQ Level II data. It was observed that the size distribution of marketable orders (transaction sizes) has power law…
We study the risk premium impact in the Perturbative Black Scholes model. The Perturbative Black Scholes model, developed by Scotti, is a subjective volatility model based on the classical Black Scholes one, where the volatility used by the…
We investigate present some new statistical properties of order books. We analyse data from the Nasdaq and investigate (a) the statistics of incoming limit order prices, (b) the shape of the average order book, and (c) the typical life time…
We present the first in-depth empirical characterization of the costs of trading on a decentralized exchange (DEX). Using quoted prices from the Uniswap Labs interface for two pools -- USDC-ETH (5bps) and PEPE-ETH (30bps) -- we evaluate the…
In this work, we aim to reconcile several apparently contradictory observations in market microstructure: is the famous "square-root law" of metaorder impact, which decays with time, compatible with the random-walk nature of prices and the…
We present a perturbation theory of the market impact based on an extension of the framework proposed by [Loeper, 2018] -- originally based on [Liu and Yong, 2005] -- in which we consider only local linear market impact. We study the…
Technical trading represents a class of investment strategies for Financial Markets based on the analysis of trends and recurrent patterns of price time series. According standard economical theories these strategies should not be used…
Financial markets populated by human traders often exhibit "market impact", where the traders' quote-prices move in the direction of anticipated change, before any transaction has taken place, as an immediate reaction to the arrival of a…
We demonstrate that the lowest possible price change (tick-size) has a large impact on the structure of financial return distributions. It induces a microstructure as well as it can alter the tail behavior. On small return intervals, the…
This study employs an event study methodology to investigate the market impact of the U.S. Securities and Exchange Commission's (SEC) classification of crypto assets as securities. It explores how SEC interventions influence asset returns…
We show that filling an order with a large number of distinct counterparts incurs additional market impact, as opposed to filling the order with a small number of counterparts. For best execution, therefore, it may be beneficial to…