Impact of big order on price
Impact of big order on price
Loading saved threads...
Alexander Chervov · External communityPost link
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.
Quote
Report
phdstudent · External communityPost link
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.
Quote
Report
nbbo2 · External communityPost link
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.
Quote
Report
siegel · External communityPost link
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
Quote
Report
Post Reply
Quoted from Forex.com.bd-Editorial External answer — Quantitative Finance Stack Exchange Author: phdstudent Source score (net votes, not local likes): 1 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.
Checking account access…