Impact of big order on price

External question — Quantitative Finance Stack Exchange Author: Alexander Chervov Original post: https://quant.stackexchange.com/questions/19082 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. What is known about the question: If someone buys or sells a huge amount of some asset how the price would change ? Of course, it depends on the kind of assets and other context. My main interest is liquid forex market like EURUSD. Say someone buy or sell 500 million - how many pips the price would change ? (Time of deal - American session - most liquid time). Does it matter the speed of execution ? Any way I would be happy to get any kind of advice on any kind of market not only forex - and any kind of info - theoretical or practical. I know the simple way to estimate - we need to consider the order book and just calculate the depth which will cover 500 Million. However it seems this method is too naive - since order book is a kind of alive - due to HFT guys new orders appear and disappear. So it may happen that the price changes and then returns to initial value in seconds.

External answer — Quantitative Finance Stack Exchange Author: phdstudent Original post: https://quant.stackexchange.com/a/19083 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. This is probably a nice paper you should refer to: Yogo, Koijen (2015) ( link ). They estimate an asset pricing model which endogenizes the price impact of large trades. It is a quite hard paper to grasp, so probably you do not want to start here, but is still one of the main references.

External answer — Quantitative Finance Stack Exchange Author: nbbo2 Original post: https://quant.stackexchange.com/a/19086 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. To start with the simplest model maybe you could start by googling "Kyle's Lambda" and proceed from there.

External answer — Quantitative Finance Stack Exchange Author: siegel Original post: https://quant.stackexchange.com/a/19087 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. You might find something useful here: Is there a standard model for market impact? And Here's a decent paper about the cost impact on equities: http://www.cims.nyu.edu/~almgren/papers/costestim.pdf I would have added this as a comment but I don't have enough reputation