I define the micro-price to be the limit of a sequence of expected mid-prices and provide conditions for this limit to exist. The micro-price is a martingale by construction and can be considered to be the ‘fair' price of an asset, conditional on the information in the order book. The...

We perform an empirical investigation of 'market impact' of trades using a large dataset of transactions executed by institutional investors in the US equity market. We find that price variations during trade execution are mainly driven by the aggregate order flow imbalance rather than the...

Time series of financial asset returns often exhibit the volatility clustering property: large changes in prices tend to cluster together, resulting in persistence of the amplitudes of price changes. After recalling various methods for quantifying and modeling this phenomenon, we discuss several...