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Paper / 2006SMQ / 79786631274583
Relation between Bid-Ask Spread, Impact and Volatility in Double Auction Markets
CFM
liquidity / market microstructureResource overview

Relation between Bid-Ask Spread, Impact and Volatility in Double Auction Markets

Paper2006

by CFM

Tags
liquiditymarket microstructure

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Suggested foundations for volatility models and surfaces and market microstructure and execution. Specialist prerequisites vary by paper.

Before you read

  1. Stochastic Processes, Brownian Motion and Itô's Lemma

    Follow diffusion-based models and their assumptions.

  2. ARCH and GARCH

    Separate conditional volatility from observed returns.

  3. Order Books

    Read bid, ask, depth and queue-based market state.

  4. Order Flow and Adverse Selection

    Understand why fills and order flow can carry information.

Go further

  1. Stochastic Volatility and the Heston Model

    Study a correlated stochastic-variance model.

  2. Reading the Implied Vol Surface — Moneyness, Term Structure, and Quoting Conventions

    Interpret prices across strikes and expiries.

  3. Market Impact

    Connect trading speed and size to execution cost.

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