Market Impact Paradoxes
Trading and Market Microstructure
2013-12-13 v1 Computational Finance
Abstract
The market impact (MI) of Volume Weighted Average Price (VWAP) orders is a convex function of a trading rate, but most empirical estimates of transaction cost are concave functions. How is this possible? We show that isochronic (constant trading time) MI is slightly convex, and isochoric (constant trading volume) MI is concave. We suggest a model that fits all trading regimes and guarantees no-dynamic-arbitrage.
Cite
@article{arxiv.1312.3349,
title = {Market Impact Paradoxes},
author = {Igor Skachkov},
journal= {arXiv preprint arXiv:1312.3349},
year = {2013}
}
Comments
20 pages, 6 figures