Related papers: Crossover from linear to square-Root market impact
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 make an extensive empirical study of the market impact of large orders (metaorders) executed in the U.S. equity market between 2007 and 2009. We show that the square root market impact formula, which is widely used in the industry and…
We revisit the "epsilon-intelligence" model of Toth et al.(2011), that was proposed as a minimal framework to understand the square-root dependence of the impact of meta-orders on volume in financial markets. The basic idea is that most of…
The available liquidity at any time in financial markets falls largely short of the typical size of the orders that institutional investors would trade. In order to reduce the impact on prices due to the execution of large orders, traders…
The notion of market impact is subtle and sometimes misinterpreted. Here we argue that impact should not be misconstrued as volatility. In particular, the so-called ``square-root impact law'', which states that impact grows as the…
Latent order book models have allowed for significant progress in our understanding of price formation in financial markets. In particular they are able to reproduce a number of stylized facts, such as the square-root impact law. An…
We propose a theory of the market impact of metaorders based on a coarse-grained approach where the microscopic details of supply and demand is replaced by a single parameter $\rho \in [0,+\infty]$ shaping the supply-demand equilibrium and…
We present a thorough empirical analysis of market impact on the Bitcoin/USD exchange market using a complete dataset that allows us to reconstruct more than one million metaorders. We empirically confirm the "square-root law'' for market…
The vast majority of market impact studies assess each product individually, and the interactions between the different order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible…
This paper is devoted to the important yet unexplored subject of crowding effects on market impact, that we call "co-impact". Our analysis is based on a large database of metaorders by institutional investors in the U.S. equity market. We…
This paper deals with a fundamental subject that has seldom been addressed in recent years, that of market impact in the options market. Our analysis is based on a proprietary database of metaorders-large orders that are split into smaller…
We present an extended version of the recently proposed "LLOB" model for the dynamics of latent liquidity in financial markets. By allowing for finite cancellation and deposition rates within a continuous reaction-diffusion setup, we…
We propose a microstructural model for the order flow in financial markets that distinguishes between {\it core orders} and {\it reaction flow}, both modeled as Hawkes processes. This model has a natural scaling limit that reconciles a…
This work extends and complements our previous theoretical paper on the subtle interplay between impact, order flow and volatility. In the present paper, we generate synthetic market data following the specification of that paper and show…
In this paper, we use a database of around 400,000 metaorders issued by investors and electronically traded on European markets in 2010 in order to study market impact at different scales. At the intraday scale we confirm a square root…
In order to pursue the issue of the relation between the financial cross-correlations and the conventional Random Matrix Theory we analyse several characteristics of the stock market correlation matrices like the distribution of…
Many independent studies on stocks and futures contracts have established that market impact is proportional to the square-root of the executed volume. Is market impact quantitatively similar for option markets as well? In order to answer…
Understanding the impact of trades on prices is a crucial question for both academic research and industry practice. It is well established that impact follows a square-root impact as a function of traded volume. However, the microscopic…
We study the price impact of order book events - limit orders, market orders and cancelations - using the NYSE TAQ data for 50 U.S. stocks. We show that, over short time intervals, price changes are mainly driven by the order flow…
Trading pressure from one asset can move the price of another, a phenomenon referred to as cross impact. Using tick-by-tick data spanning 5 years for 500 assets listed in the United States, we identify the features that make cross-impact…