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On Linearity Of Transaction Costs In Order Driven Market

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  • Nikolay A. Andreev

    (National Research University Higher School of Economics)

Abstract

We research the properties of implicit transaction costs function for general-shaped limit order book. Equivalent conditions for linearity of the function are presented in terms of market liquidity. We also present a suitable functional form of implicit costs for order-driven market on the Moscow Interbank Currency Exchange (MICEX), based on high-frequency trading data. The proposed form meets the definition of costs and implied properties while corresponding to the real form of order distribution. The results of the research have been revised and published in Andreev, N. A. (2020). On the Convexity of the Instantaneous Impact Cost Function. Journal of Mathematical Sciences, 248(1), 116-122.

Suggested Citation

  • Nikolay A. Andreev, 2014. "On Linearity Of Transaction Costs In Order Driven Market," HSE Working papers WP BRP 38/FE/2014, National Research University Higher School of Economics.
    • Handle: RePEc:hig:wpaper:38/fe/2014
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    References listed on IDEAS

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    More about this item

    Keywords

    transaction costs; limit order book; trading volume; market microstructure; market liquidity.;
    All these keywords.

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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