Related papers: Relation between Bid-Ask Spread, Impact and Volati…

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 prove the existence of an equilibrium in a model with transaction costs and price impact where two agents are incentivized to trade towards a target. The two types of frictions -- price impact and transaction costs -- lead the agents to…

We study the cause of large fluctuations in prices in the London Stock Exchange. This is done at the microscopic level of individual events, where an event is the placement or cancellation of an order to buy or sell. We show that price…

This study proposes a versatile model for the dynamics of the best bid and ask prices using an extended Hawkes process. The model incorporates the zero intensities of the spread-narrowing processes at the minimum bid-ask spread,…

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 rapid expansion of digital commerce platforms has amplified the strategic importance of coordinated pricing and inventory management decisions among competing retailers. Motivated by practices on leading e-commerce platforms, we analyze…

We study the problem of designing a two-sided market (double auction) to maximize the gains from trade (social welfare) under the constraints of (dominant-strategy) incentive compatibility and budget-balance. Our goal is to do so for an…

The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…

We consider a finite-horizon market-making problem faced by a dark pool that executes incoming buy and sell orders. The arrival flow of such orders is assumed to be random and, for each transaction, the dark pool earns a per-share…

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…

Latency (i.e., time delay) in electronic markets affects the efficacy of liquidity taking strategies. During the time liquidity takers process information and send marketable limit orders (MLOs) to the exchange, the limit order book (LOB)…

This work's purpose is to understand the dynamics of limit order books in order-driven markets. We try to illustrate a dynamical trading mechanism attached to the microstructure of limit order markets. We capture the iterative nature of…

A small investor provides liquidity at the best bid and ask prices of a limit order market. For small spreads and frequent orders of other market participants, we explicitly determine the investor's optimal policy and welfare. In doing so,…

Understanding the structure of financial markets deals with suitably determining the functional relation between financial variables. In this respect, important variables are the trading activity, defined here as the number of trades $N$,…

A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of…

We propose a method to infer lead-lag networks of traders from the observation of their trade record as well as to reconstruct their state of supply and demand when they do not trade. The method relies on the Kinetic Ising model to describe…

We introduce, in continuous time, an axiomatic approach to assign to any financial position a dynamic ask (resp. bid) price process. Taking into account both transaction costs and liquidity risk this leads to the convexity (resp. concavity)…

The goal of this paper is to disentangle the roles of volume and of participation rate in the price response of the market to a sequence of transactions. To do so, we are inspired the methodology introduced in arXiv:1402.1288,…

We study the relation between stock price changes and the difference in the number of sell and buy orders. Using a soft spin model, we describe the price impact of order imbalances and find an analogy to the fluctuation-dissipation theorem…

We examine the dynamics of the bid and ask queues of a limit order book and their relationship with the intensity of trade arrivals. In particular, we study the probability of price movements and trade arrivals as a function of the quote…