Why is the estimation of metaorder impact with public market data so challenging?

Estimating market impact and transaction costs of large trades (metaorders) is a very important topic in finance. However, using models of price and trade based on public market data provide average price trajectories which are qualitatively different from what is observed during real metaorder executions: the price increases linearly, rather than in a concave way, during the execution and the amount of reversion after its end is very limited. We claim that this is a generic phenomenon due to the fact that even sophisticated statistical models are unable to correctly describe the origin of the autocorrelation of the order flow. We propose a modified Transient Impact Model which provides more realistic trajectories by assuming that only a fraction of the metaorder trading triggers market order flow. Interestingly, in our model there is a critical condition on the kernels of the price and order flow equations in which market impact becomes permanent.

Neural Networks Asymptotic Behaviours for the Resolution of Inverse Problems

This paper presents a study of the effectiveness of Neural Network (NN) techniques for deconvolution inverse problems relevant for applications in Quantum Field Theory, but also in more general contexts. We consider NN's asymptotic limits, corresponding to Gaussian Processes (GPs), where non-linearities in the parameters of the NN can be neglected. Using these resulting GPs, we address the deconvolution inverse problem in the case of a quantum harmonic oscillator simulated through Monte Carlo techniques on a lattice. In this simple toy model, the results of the inversion can be compared with the known analytical solution. Our findings indicate that solving the inverse problem with a NN yields less performing results than those obtained using the GPs derived from NN's asymptotic limits. Furthermore, we observe the trained NN's accuracy approaching that of GPs with increasing layer width. Notably, one of these GPs defies interpretation as a probabilistic model, offering a novel perspective compared to established methods in the literature. Our results suggest the need for detailed studies of the training dynamics in more realistic set-ups.