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

Sylvain Delattre, Christian Y. Robert and Mathieu Rosenbaum

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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,...). 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 form the order flow.

Date: 2013-01, Revised 2013-04
New Economics Papers: this item is included in nep-mst
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Citations: View citations in EconPapers (18)

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