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Quantitative Finance · Glossary

What is Weighted mid price, microprice?

Also known as: weighted mid price · microprice

Definition 8.6 Research Craft: Predictors, Backtests, Measurement, Portfolios · Chapter 8 — Order-Book Features

The weighted mid price is (a qb+b qa)/(qb+qa)(a\,q^b + b\,q^a)/(q^b + q^a): the mid moved towards the side with the smaller queue. The book’s microprice is the mid plus the expected size and sign of the next mid change given the current imbalance bucket (at a one-tick spread), estimated on past data.

Mean squared error of the weighted mid and of the one-step microprice as forecasts of the mid 1, 5 and 30 seconds later, relative to the mid’s own error, on the second half of the simulated session (the microprice’s table is fitted on the first). Data: firm.tape through firm.lobfeat, seed 8.
Figure 8.4. Mean squared error of the weighted mid and of the one-step microprice as forecasts of the mid 1, 5 and 30 seconds later, relative to the mid’s own error, on the second half of the simulated session (the microprice’s table is fitted on the first). Data: firm.tape through firm.lobfeat, seed 8.
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