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Unformatted text preview: id prices is called the mid-price, denoted pmid .
Now suppose that you want to purchase q > 0 shares of the asset, where q ≤ q1 + · · · + qN , i.e.,
your purchase quantity does not exceed the total amount of the asset currently oﬀered for sale.
Your purchase proceeds as follows. Suppose that
q1 + · · · + qk < q ≤ q1 + · · · + qk+1 . Then you pay an amount
A = psell q1 + · · · + psell qk + psell (q − q1 − · · · − qk ).
k+1 Roughly speaking, you work your way through the oﬀers in the order book, from the least (ask)
price, and working your way up the order book until you ﬁll the order. We deﬁne the transaction
T (q ) = A − pmid q.
This is the diﬀerence between what you pay, and what you would have paid had you been able to
purchase the shares at the mid-price. It is always positive.
We handle the case of selling the asset in a similar way. Here we take q < 0 to mean that we sell −q...
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This note was uploaded on 09/10/2013 for the course C 231 taught by Professor F.borrelli during the Fall '13 term at University of California, Berkeley.
- Fall '13
- The Aeneid