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Tick Size and Price Diffusion

  • Gabriele La Spada
  • J. Doyne Farmer
  • Fabrizio Lillo
Part of the New Economic Windows book series (NEW)

Abstract

A tick size is the smallest increment of a security price. Tick size is typically regulated by the exchange where the security is traded and it may be modified either because the exchange enforces an overall tick size change or because the price of the security is too low or too high. There is an extensive literature, partially reviewed in Sect. 2 of the present paper, on the role of tick size in the price formation process. However, the role and the importance of tick size has not been yet fully understood, as testified, for example, by a recent document of the Committee of European Securities Regulators (CESR) [1].

Keywords

Hurst Exponent Return Distribution Limit Order Complementary Cumulative Distribution Function Volatility Cluster 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Italia 2011

Authors and Affiliations

  • Gabriele La Spada
    • 1
    • 2
  • J. Doyne Farmer
    • 3
  • Fabrizio Lillo
    • 3
    • 4
  1. 1.Department of EconomicsPrinceton UniversityPrincetonUSA
  2. 2.Department of Economic SciencesLUISSRome
  3. 3.Santa Fe InstituteSanta FeUSA
  4. 4.Department of Physics and TechnologiesUniversity of PalermoPalermoItaly

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