Optimal Display of Iceberg Orders
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 high- tech 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%.
Files in this item
Related Items
Show related Items with similar Title, Author, Creator or Subject.
-
2012-02-09BuchOn the Dark Side of the Market Identifying and Analyzing Hidden Order PlacementsHautsch, Nikolaus; Huang, RuihongTrading under limited pre-trade transparency becomes increasingly popular on financial markets. We provide first evidence on traders’ use of (completely) hidden orders which might be placed even inside of the (displayed) ...
-
2012-07-05DissertationFour essays on the econometric analysis of high-frequency order data Huang, RuihongDiese Arbeit enthält vier Aufsätze über die Beziehungen zwischen Handelsstrategien auf Aktienmärkten und dem Zustand des Marktes. Es werden ökonometrische Methoden angewendet um den Markteinfluss von limit order Platzierungen, ...
-
2017-11-07MasterarbeitVorfeldbesetzungen in deutschen Verb-Zweit-Sätzen als Lerngegenstand mit einer Untersuchung von Texten japanischer A1-LernerInnen Ulmer, CarolinIn dieser Masterarbeit wird der Erwerb von Vorfeldbesetzungen durch japanische LernerInnen behandelt. Mithilfe eines Vergleichs von Texten aus zwei verschiedenen A1-DaF-Kursen soll untersucht werden, ob die Vermittlung von ...