The Self-Financing Equation in High Frequency Markets

@article{Carmona2013TheSE,
  title={The Self-Financing Equation in High Frequency Markets},
  author={R. Carmona and Kevin Webster},
  journal={Capital Markets: Market Efficiency eJournal},
  year={2013}
}
High Frequency Trading (HFT) represents an ever growing proportion of all financial transactions as most markets have now switched to electronic order book systems. The main goal of the paper is to propose continuous time equations which generalize the self-financing relationships of frictionless markets to electronic markets with limit order books. We use NASDAQ ITCH data to identify significant empirical features such as price impact and recovery, rough paths of inventories and vanishing bid… Expand
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