Related papers: Price impact in equity auctions: zero, then linear
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…
Recent technological developments have changed the fundamental ways stock markets function, bringing regulatory instances to assess the benefits of these developments. In parallel, the ongoing machine learning revolution and its multiple…
In the present work we introduce a novel multi-agent model with the aim to reproduce the dynamics of a double auction market at microscopic time scale through a faithful simulation of the matching mechanics in the limit order book. The…
Market impact is the link between the volume of a (large) order and the price move during and after the execution of this order. We show that under no-arbitrage assumption, the market impact function can only be of power-law type.…
We study the equilibria of uniform price auctions where many asymmetric bidders have flat demands up to their respective quantity constraints. We present an iterative procedure that systematically finds an equilibrium outcome as well as an…
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.…
Through the analysis of a dataset of ultra high frequency order book updates, we introduce a model which accommodates the empirical properties of the full order book together with the stylized facts of lower frequency financial data. To do…
We study the pricing and hedging of European spread options on correlated assets when, in contrast to the standard framework and consistent with imperfect liquidity markets, the trading in the stock market has a direct impact on stocks…
We propose a static equilibrium model for limit order book where profit-maximizing investors receive an information signal regarding the liquidation value of the asset and execute via a competitive dealer with random initial inventory, who…
The composition of natural liquidity has been changing over time. An analysis of intraday volumes for the S&P500 constituent stocks illustrates that (i) volume surprises, i.e., deviations from their respective forecasts, are correlated…
We investigate the behavior of limit order books on the meso-scale motivated by order execution scheduling algorithms. To do so we carry out empirical analysis of the order flows from market and limit order submissions, aggregated from…
This paper conducts an empirically study on the trade package composed of a sequence of consecutive purchases or sales of 23 stocks in Chinese stock market. We investigate the probability distributions of the execution time, the number of…
This paper addresses the question of how much to bid to maximize the profit when trading in two electricity markets: the hourly Day-Ahead Auction and the quarter-hourly Intraday Auction. For optimal coordinated bidding many price scenarios…
We develop an empirical behavioural order-driven (EBOD) model, which consists of an order placement process and an order cancellation process. Price limit rules are introduced in the definition of relative price. The order placement process…
In this study we examine the evolution of price, volume, and the bid-ask spread after extreme 15 minute intraday price changes on the NYSE and the NASDAQ. We find that due to strong behavioral trading there is an overreaction. Furthermore…
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…
Order book dynamics play an important role in both execution time and price formation of orders in an exchange market. In this study, we aim to model the limit order arrival rates in the vicinity of the best bid and the best ask price…
We study the effect of providing information to agents who queue before a scarce good is distributed at a fixed time. Many information policies reveal "sudden bad news," when agents learn the queue is longer than previously believed. Sudden…
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 modeling framework for the dynamics of a reduced form order book in event time and based on event sizes. Our framework for the order book is influenced by [9], but compared to [9] we allow the best bid ask spread to be larger…