Market Impact Paradoxes

February 19, 2014 Cornell University, CFEM Seminar

50 Pages Posted: 22 Feb 2014

Multiple version iconThere are 2 versions of this paper

Date Written: February 19, 2014

Abstract

The market impact (MI) of Volume Weighted Average Price (VWAP) orders is a slightly convex function of a trading rate, but most empirical estimates of transaction cost are concave functions. How is this possible? We suggest a model that ts all trading regimes and guarantees no-dynamic-arbitrage.

Keywords: market impact, dynamic arbitrage, trading engines, Laplace transform

JEL Classification: C13, C21, C44, C61

Suggested Citation

Skachkov, Igor, Market Impact Paradoxes (February 19, 2014). February 19, 2014 Cornell University, CFEM Seminar, Available at SSRN: https://ssrn.com/abstract=2399030 or http://dx.doi.org/10.2139/ssrn.2399030

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