A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Paper examines costs of using wrong price impact models in trading.
Traders in a stock market exchange stock shares and form a stock trading network. Trades at different positions of the stock trading network may contain different information. We construct stock trading networks based on the limit order book data and classify traders into classes using the -shell decomposition m…
Model shows how price impact and transaction costs affect trading behavior and profits.
Optimizes trading in markets with unpredictable price impacts.
The common wisdom argues that, in general, large trades cause large price changes, while small trades cause small price changes. However, for extremely large price changes, the trade size and news play a minor role, while the liquidity (especially price gaps on the limit order book) is a more influencing factor. Hence,…
Model predicts trading strategies based on latent demand and price impact.
Proposes a new model to measure trade impact and information content in fluctuating markets.
The price impact for a single trade is estimated by the immediate response on an event time scale, i.e., the immediate change of midpoint prices before and after a trade. We work out the price impacts across a correlated financial market. We quantify the asymmetries of the distributions and of the market structures of …
We extend the framework of trading strategies of Gatheral [2010] from single stocks to a pair of stocks. Our trading strategy with the executions of two round-trip trades can be described by the trading rates of the paired stocks and the ratio of their trading periods. By minimizing the potential cost arising from cros…
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 two, suggesting that both the magnitude and time dependence of impact are univer…
Study shows how multiple traders can trade together without excessive price impact.
A counterparty credit limit (CCL) is a limit that is imposed by a financial institution to cap its maximum possible exposure to a specified counterparty. CCLs help institutions to mitigate counterparty credit risk via selective diversification of their exposures. In this paper, we analyze how CCLs impact the prices tha…
Develops a framework for valuing Asian options with market impact.
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 metaorder size, i.e., the impact per share of large metaorders is smaller than that…
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 trades and the total trading volume of trade packages, and analyze the possible s…
Optimal trading strategy under market resistance and concave price impact model.
The paper proposes a new order slicing strategy to reduce market impact in large-volume trading.
New model shows negative resilience can improve trading efficiency.
Develops a new model to optimize trading in markets.
Continuous-time model shows insider trading constraints impact market dynamics.
Optimal trading strategy derived for nonlinear price impact models.
We empirically study the trading activity in the electronic on-book segment and in the dealership off-book segment of the London Stock Exchange, investigating separately the trading of active market members and of other market participants which are non-members. We find that (i) the volume distribution of off-book tran…
Optimizes bidding in hourly and quarter-hourly electricity markets to reduce price impact.
The study examines how brokers' identity affects their trading strategies on the Toronto Stock Exchange.
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…
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 codes using data from the Spanish Stock Market and the London Stock Exchange. We…
Market impact is reduced when orders are filled with concentrated counterparts.
We consider trading against a hedge fund or large trader that must liquidate a large position in a risky asset if the market price of the asset crosses a certain threshold. Liquidation occurs in a disorderly manner and negatively impacts the market price of the asset. We consider the perspective of small investors whos…
We extend the "No-dynamic-arbitrage and market impact"-framework of Jim Gatheral [Quantitative Finance, 10(7): 749-759 (2010)] to the multi-dimensional case where trading in one asset has a cross-impact on the price of other assets. From the condition of absence of dynamical arbitrage we derive theoretical limits for t…
Market impact has become a subject of increasing concern among academics and industry experts. We put forward a price impact model which considers the heteroscedasticity of price in the time dimension and dependency between permanent impact and temporary impact. We discuss and derive the extremum of the expectation of …
We present an analysis of the price impact associated with trades effected by different financial firms. Using data from the Spanish Stock Market, we find a high degree of heterogeneity across different market members, both in the instantaneous impact functions and in the time-dependent market response to trades by ind…
Optimal trading strategy adapts to signals in markets with price impact.
Bayesian theory explains market impact of large trades.
The paper classifies trades into types based on proximity and measures their impact on stock prices.
The paper analyzes trading strategies in a competitive market with incomplete information.
The trade size has direct impact on the price formation of the stock traded. Econophysical analyses of transaction data for the US and Australian stock markets have uncovered market-specific scaling laws, where a master curve of price impact can be obtained in each market when stock capitalization is included a…
Paper optimizes broker performance by estimating execution costs.
Summarizes key algorithmic trading problems and recent advances.
Silkswap models stablecoin trading with minimal price impact.
Generalizes insider trading model to multiple assets.
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 respectively the trade arrival self-excitation, the price changes mean reversion…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution strategy strongly depends on a careful modeling of market impact, i.e. how the pr…
A simple learning agent learns to trade in an agent-based market model.
Game theory models how agents trade in a risky asset considering price impact and a common signal.
The paper applies thermodynamics to financial markets to prove no-arbitrage constraints.
In this paper, the Kyle model of insider trading is extended by characterizing the trading volume with long memory and allowing the noise trading volatility to follow a general stochastic process. Under this newly revised model, the equilibrium conditions are determined, with which the optimal insider trading strategy,…
Study liquidity impact on spread option pricing.
Two models are identified for robust cross-impact analysis.