2024/12/10 by Youssef Ouazzani Chahdi, Chahdi, Youssef Ouazzani, Mathieu Rosenbaum +3 · 1 citation
Economics, Econometrics and Finance · #60G55 #62P05 #91G80 #Complex Systems and Time Series Analysis #FOS: Economics and business #FOS: Mathematics #Financial Markets and Investment Strategies #Mathematical Finance (q-fin.MF) #Merger and Competition Analysis #Probability (math.PR) #Trading and Market Microstructure (q-fin.TR)
paper · pdf · doi:10.48550/arxiv.2412.07461
openalex publication_date 2024/12/10 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
While the market impact of aggressive orders has been extensively studied, the impact of passive orders, those executed through limit orders, remains less understood. The goal of this paper is to investigate passive market impact by developing a microstructure model connecting liquidity dynamics and price moves. A key innovation of our approach is to replace the traditional assumption of constant information content for each trade by a function that depends on the available volume in the limit order book. Within this framework, we explore scaling limits and analyze the market impact of passive metaorders. Additionally, we derive useful approximations for the shape of market impact curves, leading to closed-form formulas that can be easily applied in practice.