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Quantitative Finance · Glossary

What is Fair pricing condition?

Definition 13.3 Microstructure and Execution · Chapter 13 — Metaorders, Latent Liquidity and Cross-Impact

The fair pricing condition (Farmer, Gerig, Lillo and Waelbroeck, 2013) states that the average price paid for a metaorder equals the price after it is completed: whoever filled it was not paid for being picked off, and the metaorder’s owner paid for what its trading revealed.

A metaorder of 10 on the latent book: the impact during the execution (shaded) and after it, against the average price paid. The price crosses the average two seconds after the end and keeps falling. Data: mx_cross.fair.
Figure 13.2. A metaorder of 10 on the latent book: the impact during the execution (shaded) and after it, against the average price paid. The price crosses the average two seconds after the end and keeps falling. Data: mx_cross.fair.
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