Estimating the efficient price from the order flow: A Brownian Cox process approach

Sylvain Delattre, Christian Y. Robert and Mathieu Rosenbaum

Stochastic Processes and their Applications, 2013, vol. 123, issue 7, 2603-2619

Abstract: At the ultra high frequency level, the notion of price of an asset is very ambiguous. Indeed, many different prices can be defined (last traded price, best bid price, mid price, etc.). Thus, in practice, market participants face the problem of choosing a price when implementing their strategies. In this work, we propose a notion of efficient price which seems relevant in practice. Furthermore, we provide a statistical methodology enabling to estimate this price from the order flow.

Keywords: Efficient price; Order flow; Response function; Market microstructure; Cox processes; Fractional part of Brownian motion; Non parametric estimation; Functional limit theorems (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:spapps:v:123:y:2013:i:7:p:2603-2619

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DOI: 10.1016/j.spa.2013.04.012

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