Related papers: Do fundamentals shape the price response? A critic…
We provide an economically sound micro-foundation to linear price impact models, by deriving them as the equilibrium of a suitable agent-based system. Our setup generalizes the well-known Kyle model, by dropping the assumption of a terminal…
In this research, we have empirically investigated the key drivers affecting liquidity in equity markets. We illustrated how theoretical models, such as Kyle's model, of agents' interplay in the financial markets, are aligned with the…
Classical Kyle-type models of informed trading typically treat noise trader demand as purely exogenous. In reality, many market participants react to price movements and news, generating feedback effects that can significantly alter market…
The impact of trades on asset prices is a crucial aspect of market dynamics for academics, regulators and practitioners alike. Recently, universal and highly nonlinear master curves were observed for price impacts aggregated on all…
We propose a minimal theory of non-linear price impact based on a linear (latent) order book approximation, inspired by diffusion-reaction models and general arguments. Our framework allows one to compute the average price trajectory in the…
We introduce a multivariate Hawkes process that accounts for the dynamics of market prices through the impact of market order arrivals at microstructural level. Our model is a point process mainly characterized by 4 kernels associated with…
Market impact is a key concept in the study of financial markets and several models have been proposed in the literature so far. The Transient Impact Model (TIM) posits that the price at high frequency time scales is a linear combination of…
Estimating market impact and transaction costs of large trades (metaorders) is a very important topic in finance. However, using models of price and trade based on public market data provide average price trajectories which are…
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…
We construct an equilibrium for the continuous time Kyle's model with stochastic liquidity, a general distribution of the fundamental price, and correlated stock and volatility dynamics. For distributions with positive support, our…
We analyze a proprietary dataset of trades by a single asset manager, comparing their price impact with that of the trades of the rest of the market. In the context of a linear propagator model we find no significant difference between the…
This article provides a simple explanation of the asymptotic concavity of the price impact of a meta-order via the microstructural properties of the market. This explanation is made more precise by a model in which the local relationship…
This note explores the consequences of nonlinear price impact functions on price dynamics within the chartist-fundamentalist framework. Price impact functions may be nonlinear with respect to trading volume. As indicated by recent empirical…
It is known that the impact of transactions on stock price (market impact) is a concave function of the size of the order, but there exists little quantitative theory that suggests why this is so. I develop a quantitative theory for the…
We reconsider the multivariate Kyle model in a risk-neutral setting with a single, perfectly informed rational insider and a rational competitive market maker, setting the price of n correlated securities. We prove the unicity of a…
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 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 present a Markovian market model driven by a hidden Brownian efficient price. In particular, we extend the queue-reactive model, making its dynamics dependent on the efficient price. Our study focuses on two sub-models: a signal-driven…
Prediction markets are a popular, prominent, and successful structure for a collective intelligence platform. However the exact mechanism by which information known to the participating traders is incorporated into the market price is…
How and why stock prices move is a centuries-old question still not answered conclusively. More recently, attention shifted to higher frequencies, where trades are processed piecewise across different timescales. Here we reveal that price…