2012/07/26 by Khalil Al Dayri, Dayri, Khalil, Mathieu Rosenbaum +1 · 3 citations
Economics, Econometrics and Finance · #Complex Systems and Time Series Analysis #FOS: Economics and business #Financial Markets and Investment Strategies #Stochastic processes and financial applications #Trading and Market Microstructure (q-fin.TR)
paper · doi:10.48550/arxiv.1207.6325
openalex publication_date 2012/07/26 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
In this work, we provide a framework linking microstructural properties of an asset to the tick value of the exchange. In particular, we bring to light a quantity, referred to as implicit spread, playing the role of spread for large tick assets, for which the effective spread is almost always equal to one tick. The relevance of this new parameter is shown both empirically and theoretically. This implicit spread allows us to quantify the tick sizes of large tick assets and to define a notion of optimal tick size. Moreover, our results open the possibility of forecasting the behavior of relevant market quantities after a change in the tick value and to give a way to modify it in order to reach an optimal tick size.