A maximum-entropy 'Boltzmann price' family interpolates between mid-price and weighted mid-price, and its imbalance-driven dynamics generate fat-tailed price changes that broadly resemble historical equity data.
Market Impact of Small Orders
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abstract
The article is an empirical study of market impact through order book events. It describes a mechanism of extracting an average participation rate and a market impact of small orders which represent individual slices of large metaorders. The study is based on tick data for futures contracts. It is shown that the impact could be either linear or a concave function as a function of trading volume, depending on the instrument. After normalisation, this dependency is shown to be very similar for a wide range of instruments. A simple yet effective model for market impact estimation is proposed. This model is linear in nature and is derived based on straightforward microstructure reasoning. The estimation shows satisfactory results for both concave and linear market impact volume dependencies.
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Boltzmann Price: Toward Understanding the Fair Price in High-Frequency Markets
A maximum-entropy 'Boltzmann price' family interpolates between mid-price and weighted mid-price, and its imbalance-driven dynamics generate fat-tailed price changes that broadly resemble historical equity data.