Related papers: Nonlinear price impact from linear models
We study inflationary scenarios driven by a scalar field in the presence of a non-minimal coupling between matter and curvature. We show that the Friedmann equation can be significantly modified when the energy density during inflation…
This paper is devoted to the important yet little explored subject of the market impact of limit orders. Our analysis is based on a proprietary database of metaorders - large orders that are split into smaller pieces before being sent to…
We study a class of nonlinear pricing models which involves the feedback effect from the dynamic hedging strategies on the price of asset introduced by Sircar and Papanicolaou. We are first to study the case of a nonlinear demand function…
We model the impact costs of a strategy that trades a basket of correlated instruments, by extending to the multivariate case the linear propagator model previously used for single instruments. Our specification allows us to calibrate a…
We discuss several models in order to shed light on the origin of power-law distributions and power-law correlations in financial time series. From an empirical point of view, the exponents describing the tails of the price increments…
The paper presents a step forward into the development of the theory of meaning. Stock and financial markets are examined from communication-theoretical perspective on the dynamics of information and meaning. This study focuses on the link…
This paper performs the numerical analysis and the computation of a Spread option in a market with imperfect liquidity. The number of shares traded in the stock market has a direct impact on the stock's price. Thus, we consider a…
Prices in financial markets exhibit extreme jumps far more often than can be accounted for by external news. Further, magnitudes of price changes are correlated over long times. These so called stylized facts are quantified by scaling laws…
This paper proposes a novel model of financial prices where: (i) prices are discrete; (ii) prices change in continuous time; (iii) a high proportion of price changes are reversed in a fraction of a second. Our model is analytically…
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…
We attempt to explain stock market dynamics in terms of the interaction among three variables: market price, investor opinion and information flow. We propose a framework for such interaction and apply it to build a model of stock market…
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…
Arguably the most important problem in quantitative finance is to understand the nature of stochastic processes that underlie market dynamics. One aspect of the solution to this problem involves determining characteristics of the…
We introduce a system of kinetic equations describing an exchange market consisting of two populations of agents (dealers and speculators) expressing the same preferences for two goods, but applying different strategies in their exchanges.…
While the market impact of aggressive orders has been extensively studied, the impact of passive orders, those executed through limit orders, remains less understood. The goal of this paper is to investigate passive market impact by…
The dynamics of market prices is described as the evolution of opinions in the trading community regarding future market behavior. The price then is a function of the voting process of the market players in favor to raise or reduce the…
Choice modeling is at the core of understanding how changes to the competitive landscape affect consumer choices and reshape market equilibria. In this paper, we propose a fundamental characterization of choice functions that encompasses a…
We consider asset price models whose dynamics are described by linear functions of the (time extended) signature of a primary underlying process, which can range from a (market-inferred) Brownian motion to a general multidimensional…
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 develop a novel observation-driven model for high-frequency prices. We account for irregularly spaced observations, simultaneous transactions, discreteness of prices, and market microstructure noise. The relation between trade durations…