Workshop MFG in Economics

Mathieu Rosenbaum (CEREMADE, Université Paris Dauphine - PSL) Titre : Volume, Volatility and market impact: a tale of three fractional brothers Abstract : Price volatility and order flow dynamics are two commonly used measures of the intensity of market fluctuations that are evidently closely related. However, on the one hand, the rough nature of the volatility is an undeniable stylized fact. On the other hand, smooth fractional Brownian motions have been proposed to capture the autocorrelation of the order flow, in contrast to the paradigm of rough volatility. We discuss how to resolve this apparent contradiction, providing new microstructural foundations for the joint dynamics of prices, volatility and volumes and making the connection with market impact. This is joint work with Johannes Muhle-Karbe, Youssef Ouazzabi Chahdi and  Grégoire Szymanski. Download slides