English, Article, Journal or magazine article edition: Understanding the ex-Ante cost of liquidity in the limit order book: A note. Miguel Angel Martinez; Gonzalo Rubio; Mikel Tapia

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Bookmark: http://trove.nla.gov.au/version/183369
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Understanding the ex-Ante cost of liquidity in the limit order book: A note.
Author
  • Miguel Angel Martinez
  • Gonzalo Rubio
  • Mikel Tapia
Physical Description
  • preprint
Notes
  • This paper estimates a new measure of liquidity costs in a market driven by orders. It represents the cost of simultaneously buying and selling a given amount of shares, and it is given by a single measure of ex-ante liquidity that aggregates all available information in the limit order book for a given number of shares. The cost of liquidity is an increasing function relating bid-ask spreads with the amounts available for trading. This measure completely characterizes the cost of liquidity of any given asset. It does not suffer from the usual ambiguities related to either the bid-ask spread or depth when they are considered separately. On the contrary, with a single measure, we are able to capture all dimensions of liquidity costs on ex-ante basis.
  • liquidity function, liquidity cost, open limit order book, bid-ask spread, depth
  • RePEc:ehu:dfaeii:200203
Language
  • English
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