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. 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.

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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