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Price Impact in a Latent Order Book

Ismael Lemhadri

Market Microstructure and Liquidity2019https://doi.org/10.1142/s2382626620500045article
ABDC B
Weight
0.47

What the paper says

The latent order book of [Donier et al., 2015, A fully consistent, minimal model for nonlinear market impact, Quantitative Finance 15(7), 1109–1121] is one of the most promising agent-based models for market impact. This work extends the minimal model by allowing agents to exhibit mean-reversion, a commonly observed pattern in real markets. This modification leads to new order book dynamics, which we explicitly study and analyze. Underlying our analysis is a mean-field assumption that views the order book through its average density. We show how price impact develops in this new model, providing a flexible family of solutions that can potentially be calibrated to real data. While no closed-form solution is provided, we complement our theoretical investigation with extensive numerical results, including a simulation scheme for the entire order book.

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https://doi.org/https://doi.org/10.1142/s2382626620500045

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@article{ismael2019,
  title        = {{Price Impact in a Latent Order Book}},
  author       = {Ismael Lemhadri},
  journal      = {Market Microstructure and Liquidity},
  year         = {2019},
  doi          = {https://doi.org/https://doi.org/10.1142/s2382626620500045},
}

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Price Impact in a Latent Order Book

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Evidence weight

0.47

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.31 × 0.4 = 0.12
M · momentum0.80 × 0.15 = 0.12
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.