Abstract
Assuming a particular price process, it was shown by Gatheral in [6], that a model that combines nonlinear price impact with exponential decay of market impact admits price manipulation, an undesirable feature that should lead to rejection of the model. Subsequently, Alfonsi and Schied proved in [2] that their model of the order book which has nonlinear market impact and exponential resilience, is free of price manipulation. In this paper, we show how these at-first-sight incompatible results are in reality perfectly compatible.
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References
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© 2011 Springer-Verlag Italia
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Gatheral, J., Schied, A., Slynko, A. (2011). Exponential Resilience and Decay of Market Impact. In: Abergel, F., Chakrabarti, B.K., Chakraborti, A., Mitra, M. (eds) Econophysics of Order-driven Markets. New Economic Windows. Springer, Milano. https://doi.org/10.1007/978-88-470-1766-5_15
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DOI: https://doi.org/10.1007/978-88-470-1766-5_15
Publisher Name: Springer, Milano
Print ISBN: 978-88-470-1765-8
Online ISBN: 978-88-470-1766-5
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