A characterisation of cross-impact kernels

35 Pages Posted: 22 Jul 2021

See all articles by Mathieu Rosenbaum

Mathieu Rosenbaum

Ecole Polytechnique, Palaiseau

Mehdi Tomas

Ecole Polytechnique

Date Written: July 19, 2021

Abstract

Trading a financial asset pushes its price as well as the prices of other assets, a phenomenon known as cross-impact. We consider a general class of kernel-based cross-impact models and investigate suitable parameterisations for trading purposes. We focus on kernels that guarantee that prices are martingales and anticipate future order flow (martingale-admissible kernels) and those that ensure there is no possible price manipulation (no-statistical-arbitrage-admissible kernels). We determine the overlap between these two classes and provide formulas for calibration of cross-impact kernels on data. We illustrate our results using SP500 futures data.

Keywords: Cross impact, market impact, multidimensional processes, market microstructure, market efficiency, statistical arbitrag

JEL Classification: G10, G11, G12

Suggested Citation

Rosenbaum, Mathieu and Tomas, Mehdi, A characterisation of cross-impact kernels (July 19, 2021). Available at SSRN: https://ssrn.com/abstract=3889265 or http://dx.doi.org/10.2139/ssrn.3889265

Mathieu Rosenbaum

Ecole Polytechnique, Palaiseau ( email )

Route de Saclay
Palaiseau, 91128
France

Mehdi Tomas (Contact Author)

Ecole Polytechnique ( email )

Route de Saclay
Palaiseau, 91128
France

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
193
Abstract Views
632
rank
198,102
PlumX Metrics