The square-root impact law also holds for option markets

2016/02/09 by Toth, Bence, Eisler, Zoltan, Bouchaud, Jean-Philippe · 3 citations
#FOS: Economics and business #Trading and Market Microstructure (q-fin.TR)

paper · doi:10.48550/arxiv.1602.03043

Abstract

Many independent studies on stocks and futures contracts have established that market impact is proportional to the square-root of the executed volume. Is market impact quantitatively similar for option markets as well? In order to answer this question, we have analyzed the impact of a large proprietary data set of option trades. We find that the square-root law indeed holds in that case. This finding supports the argument for a universal underlying mechanism.

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• Robust Reinforcement Learning in Finance: Modeling Market Impact with Elliptic Uncertainty Sets
• The Invisible Handshake: Persistent Overpricing by Adaptive Market Agents
• Nonparametric Estimation of Self- and Cross-Impact

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