Optimal display of Iceberg orders
| Autor: | Cebiroğlu, Gökhan, Horst, Ulrich |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2011 |
| Předmět: |
agency-trading
D49 trading strategies Börsenumsatz Hochtechnologiesektor Elektronisches Handelssystem Wertpapierhandel Marktliquidität market impact of limit orders pre-trade transparency Börsenkurs hidden liquidity C60 C51 G1 ddc:330 optimal exposure D01 D4 Iceberg Orders USA C67 limit order book Iceberg versus Limit Order Schätzung |
| Popis: | We develop a sequential trade model of Iceberg order execution in a limit order book. The Iceberg-trader has the freedom to expose his trading intentions or (partially) shield the true order size against other market participants. Order exposure can cause drastic market reactions ('market impact') in the end leading to higher transaction costs. On the other hand the Iceberg trader faces a loss-in-priority when he hides his intentions, as most electronic limit order books penalize the usage of hidden liquidity. Thus the Iceberg-trader is faced with the problem to find the right trade-off. Our model provides optimal exposure strategies for Iceberg traders in limit order book markets. In particular, we provide a range of analytical statements that are in line with recent empirical findings on the determinants of trader's exposure strategies. In this framework, we also study the market impact also market impact of limit orders. We provide optimal exposure profiles for a range of hightech stocks from the US S&P500 and how they scale with the state-of-the-book. We finally test the Iceberg's performance against the limit orders and find that Iceberg orders can significantly enhance trade performance by up to 60%. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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