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On Linearity Of Transaction Costs In Order Driven Market

Nikolay Andreev

HSE Working papers from 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.

Keywords: transaction costs; limit order book; trading volume; market microstructure; market liquidity. (search for similar items in EconPapers)
JEL-codes: C60 G11 G17 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2014
New Economics Papers: this item is included in nep-mst
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Published in WP BRP Series: Financial Economics / FE, October 2014, pages - 25

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