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Michael Benzaquen

Publications and source records attributed to Michael Benzaquen.

At least 73 records · Page 4Linked to original sources

Impact is not just volatility

The notion of market impact is subtle and sometimes misinterpreted. Here we argue that impact should not be misconstrued as volatility. In particular, the so-called ``square-root impact law'', which states that impact grows as the square-root of traded volume, has nothing to do with price diffusion, i.e. that typical price changes grow as the square-root of time. We rationalise empirical findings on impact and volatility by introducing a simple scaling argument and confronting it to data.

q-fin.TR↗

Turbulent windprint on a liquid surface

We investigate the effect of a light turbulent wind on a liquid surface, below the onset of wave generation. In that regime, the liquid surface is populated by small disorganised deformations elongated in the streamwise direction. Formally identified recently by Paquier et al. (2015), the deformations that occur below the wave onset were named wrinkles. We provide here a theoretical framework for this wrinkle regime, using the viscous response of a free surface liquid submitted to arbitrary normal and tangential interfacial stresses at its upper boundary. We relate the spatio-temporal spectrum of the surface deformations to that of the applied interfacial pressure and shear stress fluctuations. For that, we evaluate the spatio-temporal statistics of the turbulent forcing using Direct Numerical Simulation of a turbulent air channel flow, assuming no coupling between the air and the liquid flows. Combining theory and numerical simulation, we thus obtain synthetic wrinkles that reproduce previous experimental investigations. We show that the wrinkles are a multi-scale superposition of random wakes generated by the turbulent fluctuations. They result mainly from the nearly isotropic pressure fluctuations generated in the boundary layer, rather than from the elongated shear stress fluctuations. The wrinkle regime described in this paper naturally arises as the viscous-saturated asymptotic of the inviscid growth theory of Phillips (1957). Experiments indicate that the onset of exponential wave growth depends on the liquid viscosity. Our theory suggests that the empirical criterion for the onset is satisfied when the wrinkle amplitude reaches a given fraction of the viscous sublayer thickness. It indicates that the turbulent fluctuations near the onset may play a role in the triggering of exponential wave growth.

physics.flu-dyn↗

Physics of rowing oars

In each rowing sport, the oars have their very own characteristics most of the time selected through a long time experience. Here we address experimentally and theoretically the problem of rowing efficiency as function of row lengths and blades sizes. In contrast with previous studies which consider imposed kinematics, we set an imposed force framework which is closer to human constraints. We find that optimal row lengths and blades sizes depend on sports and athletes strength, and provide an optimisation scheme.

physics.pop-ph↗

No net motion for oscillating near-spheres at low Reynolds numbers

We investigate the flow around an oscillating nearly-spherical particle at low, yet non-vanishing, Reynolds numbers, and the potential resulting locomotion. We analytically demonstrate that no net motion can arise up to order one in Re and order one in the asphericity parameter, regardless of the particle's shape. Therefore, geometry-induced acoustic streaming propulsion, if any, must arise at higher order.

physics.flu-dyn↗

Are trading invariants really invariant? Trading costs matter

We revisit the trading invariance hypothesis recently proposed by Kyle and Obizhaeva by empirically investigating a large dataset of bets, or metaorders, provided by ANcerno. The hypothesis predicts that the quantity $I:=\ri/N^{3/2}$, where $\ri$ is the exchanged risk (volatility $\times$ volume $\times$ price) and $N$ is the number of bets, is invariant. We find that the $3/2$ scaling between $\ri$ and $N$ works well and is robust against changes of year, market capitalisation and economic sector. However our analysis clearly shows that $I$ is not invariant. We find a very high correlation $R^2>0.8$ between $I$ and the total trading cost (spread and market impact) of the bet. We propose new invariants defined as a ratio of $I$ and costs and find a large decrease in variance. We show that the small dispersion of the new invariants is mainly driven by (i) the scaling of the spread with the volatility per transaction, (ii) the near invariance of the distribution of metaorder size and of the volume and number fractions of bets across stocks.

q-fin.TR↗

Slow decay of impact in equity markets: insights from the ANcerno database

We present an empirical study of price reversion after the executed metaorders. We use a data set with more than 8 million metaorders executed by institutional investors in the US equity market. We show that relaxation takes place as soon as the metaorder ends:{while at the end of the same day it is on average $\approx 2/3$ of the peak impact, the decay continues the next days, following a power-law function at short time scales, and converges to a non-zero asymptotic value at long time scales (${\sim 50}$ days) equal to $\approx 1/2$ of the impact at the end of the first day.} Due to a significant, multiday correlation of the sign of executed metaorders, a careful deconvolution of the \emph{observed} impact must be performed to extract the estimate of the impact decay of isolated metaorders.

q-fin.TR↗

The Multivariate Kyle model: More is different

We reconsider the multivariate Kyle model in a risk-neutral setting with a single, perfectly informed rational insider and a rational competitive market maker, setting the price of n correlated securities. We prove the unicity of a symmetric, positive definite solution for the impact matrix and provide insights on its interpretation. We explore its implications from the perspective of empirical market microstructure, and argue that it provides a sensible inference procedure to cure some pathologies encountered in recent attempts to calibrate cross-impact matrices. As an illustration, we determine the empirical cross impact matrix of US. Treasuries, and compare the results with recent alternative calibration methods.

q-fin.TR↗

How does latent liquidity get revealed in the limit order book?

Latent order book models have allowed for significant progress in our understanding of price formation in financial markets. In particular they are able to reproduce a number of stylized facts, such as the square-root impact law. An important question that is raised -- if one is to bring such models closer to real market data -- is that of the connection between the latent (unobservable) order book and the real (observable) order book. Here we suggest a simple, consistent mechanism for the revelation of latent liquidity that allows for quantitative estimation of the latent order book from real market data. We successfully confront our results to real order book data for over a hundred assets and discuss market stability. One of our key theoretical results is the existence of a market instability threshold, where the conversion of latent order becomes too slow, inducing liquidity crises. Finally we compute the price impact of a metaorder in different parameter regimes.

q-fin.TR↗

Crossover from linear to square-Root market impact

Using a large database of 8 million institutional trades executed in the U.S. equity market, we establish a clear crossover between a linear market impact regime and a square-root regime as a function of the volume of the order. Our empirical results are remarkably well explained by a recently proposed dynamical theory of liquidity that makes specific predictions about the scaling function describing this crossover. Allowing at least two characteristic time scales for the liquidity (`fast' and `slow') enables one to reach quantitative agreement with the data.

q-fin.TR↗

Thin or bulky: optimal aspect ratios for ship hulls

Empirical data reveals a broad variety of hull shapes among the different ship categories. We present a minimal theoretical approach to address the problem of ship hull optimisation. We show that optimal hull aspect ratios result -- at given load and propulsive power -- from a subtle balance between wave drag, pressure drag and skin friction. Slender hulls are more favourable in terms of wave drag and pressure drag, while bulky hulls have a smaller wetted surface for a given immersed volume, by that reducing skin friction. We confront our theoretical results to real data and discuss discrepancies in the light of hull designer constraints, such as stability or manoeuvrability.

physics.flu-dyn↗

Unsteady wave pattern generation by water striders

We perform an experimental and theoretical study of the wave pattern generated by the leg strokes of water striders during a propulsion cycle. Using the synthetic Schlieren method, we are able to measure the dynamic response of the free surface accurately. In order to match experimental conditions, we extend Bühler's theory of impulsive forcing (\cite{buhler}) to finite depth. We demonstrate the improved ability of this approach to reproduce the experimental findings, once the observed continuous forcing and hence non-zero temporal and spatial extent of the leg strokes is also taken into account.

physics.flu-dyn↗

Adsorption-Induced Slip Inhibition for Polymer Melts on Ideal Substrates

Hydrodynamic slip of a liquid at a solid surface represents a fundamental phenomenon in fluid dynamics that governs liquid transport at small scales. For polymeric liquids, de Gennes predicted that the Navier boundary condition together with the theory of polymer dynamics imply extraordinarily large interfacial slip for entangled polymer melts on ideal surfaces; this Navier-de Gennes model was confirmed using dewetting experiments on ultra-smooth, low-energy substrates. Here, we use capillary leveling - surface tension driven flow of films with initially non-uniform thickness - of polymeric films on these same substrates. Measurement of the slip length from a robust one-parameter fit to a lubrication model is achieved. We show that at the lower shear rates involved in leveling experiments as compared to dewetting ones, the employed substrates can no longer be considered ideal. The data is instead consistent with physical adsorption of polymer chains at the solid/liquid interface. We extend the Navier-de Gennes description using one additional parameter, namely the density of physically adsorbed chains per unit surface. The resulting formulation is found to be in excellent agreement with the experimental observations.

cond-mat.soft↗

Market impact with multi-timescale liquidity

We present an extended version of the recently proposed "LLOB" model for the dynamics of latent liquidity in financial markets. By allowing for finite cancellation and deposition rates within a continuous reaction-diffusion setup, we account for finite memory effects on the dynamics of the latent order book. We compute in particular the finite memory corrections to the square root impact law, as well as the impact decay and the permanent impact of a meta-order. The latter is found to be linear in the traded volume and independent of the trading rate, as dictated by no-arbitrage arguments. In addition, we consider the case of a spectrum of cancellation and deposition rates, which allows us to obtain a square root impact law for moderate participation rates, as observed empirically. Our multi-scale framework also provides an alternative solution to the so-called price diffusivity puzzle in the presence of a long-range correlated order flow.

q-fin.TR↗

A fractional reaction-diffusion description of supply and demand

We suggest that the broad distribution of time scales in financial markets could be a crucial ingredient to reproduce realistic price dynamics in stylised Agent-Based Models. We propose a fractional reaction-diffusion model for the dynamics of latent liquidity in financial markets, where agents are very heterogeneous in terms of their characteristic frequencies. Several features of our model are amenable to an exact analytical treatment. We find in particular that the impact is a concave function of the transacted volume (aka the "square-root impact law"), as in the normal diffusion limit. However, the impact kernel decays as $t^{-β}$ with $β=1/2$ in the diffusive case, which is inconsistent with market efficiency. In the sub-diffusive case the decay exponent $β$ takes any value in $[0,1/2]$, and can be tuned to match the empirical value $β\approx 1/4$. Numerical simulations confirm our theoretical results. Several extensions of the model are suggested.

q-fin.MF↗

Trading Lightly: Cross-Impact and Optimal Portfolio Execution

We model the impact costs of a strategy that trades a basket of correlated instruments, by extending to the multivariate case the linear propagator model previously used for single instruments. Our specification allows us to calibrate a cost model that is free of arbitrage and price manipulation. We illustrate our results using a pool of US stocks and show that neglecting cross-impact effects leads to an incorrect estimation of the liquidity and suboptimal execution strategies. We show in particular the importance of synchronizing the execution of correlated contracts.

q-fin.TR↗

Dynamics of anchored oscillating nanomenisci

We present a self-contained study of the dynamics of oscillating nanomenisci anchored on nanometric topographical defects around a cylindrical nanofiber -- radius below 100 nm. Using frequency-modulation atomic force microscopy (FM-AFM), we show that the friction coefficient surges as the contact angle is decreased. We propose a theoretical model within the lubrification approximation that reproduces the experimental data and provides a comprehensive description of the dynamics of the nanomeniscus. The dissipation pattern in the vicinity of the contact line and the anchoring properties are discussed as a function of liquid and surface properties in addition to the sollicitation conditions.

cond-mat.soft↗

Dissecting cross-impact on stock markets: An empirical analysis

The vast majority of market impact studies assess each product individually, and the interactions between the different order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible contagion effects. Transactions in fact mediate a significant part of the correlation between different instruments. In turn, liquidity shares the sectorial structure of market correlations, which can be encoded as a set of eigenvalues and eigenvectors. We introduce a multivariate linear propagator model that successfully describes such a structure, and accounts for a significant fraction of the covariance of stock returns. We dissect the various dynamical mechanisms that contribute to the joint dynamics of assets. We also define two simplified models with substantially less parameters in order to reduce overfitting, and show that they have superior out-of-sample performance.

q-fin.TR↗

Elastic interactions between topological defects in chiral nematic shells

We present a novel, self-consistent and robust theoretical model to investigate elastic interactions between topological defects in liquid crystal shells. Accounting for the non-concentric nature of the shell in a simple manner, we are able to successfully and accurately explain and predict the positions of the defects, most relevant in the context of colloidal self-assembly. We calibrate and test our model on existing experimental data, and extend it to all newly observed defects configurations in chiral nematic shells. We perform new experiments to check further and confirm the validity of the present model. Moreover, we are able to obtain quantitative estimates of the energies of $+1$ or $+3/2$ disclination lines in cholesterics, whose intricate nature was only reported recently.

cond-mat.soft↗