Related papers: Modeling metaorder impact with a Non-Markovian Zer…
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…
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 develop a theory for the market impact of large trading orders, which we call metaorders because they are typically split into small pieces and executed incrementally. Market impact is empirically observed to be a concave function 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…
We present a measurement of price impact in order-driven markets that does not require averages across executions or scenarios. Given the order book data associated with one single execution of a sell metaorder, we measure its contribution…
We study the market impact of a meta-order in the framework of the Minority Game. This amounts to studying the response of the market when introducing a trader who buys or sells a fixed amount h for a finite time T. This perturbation…
Standard models in economics stress the role of intelligent agents who maximize utility. However, there may be situations where, for some purposes, constraints imposed by market institutions dominate intelligent agent behavior. We use data…
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…
Motivated by a zero-intelligence approach, the aim of this paper is to connect the microscopic (discrete price and volume), mesoscopic (discrete price and continuous volume) and macroscopic (continuous price and volume) frameworks for the…
Most modern financial markets use a continuous double auction mechanism to store and match orders and facilitate trading. In this paper we develop a microscopic dynamical statistical model for the continuous double auction under the…
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 propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical…
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…
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 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 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…
We study the problem of the execution of a moderate size order in an illiquid market within the framework of a solvable Markovian model. We suppose that in order to avoid impact costs, a trader decides to execute her order through a unique…
We empirically study the market impact of trading orders. We are specifically interested in large trading orders that are executed incrementally, which we call hidden orders. These are reconstructed based on information about market member…
This paper considers a Markovian model of a limit order book where time-dependent rates are allowed. With the objective of understanding the mechanisms through which a microscopic model of an orderbook can converge to more general diffusion…
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…