A Mathematical Framework for the Microstructure of Financial Markets

Toke Zinn*, Orimar Sauri, Jesper Jung, Esben Høg

*Corresponding author for this work

Research output: Working paper/PreprintPreprint

Abstract

We present a rigorous mathematical framework for the microstructure of financial markets based on tuples. We define a metric for the proposed spaces and show that under fairly regular conditions, they are complete and separable. In addition, we define operations, which mimic interaction with the market, and we show that these are continuous for the proposed metric. Then, via examples from the German day-ahead and intraday power markets, we show how our results immediately yield an approach to compute the impact of an interaction within the market.
Translated title of the contributionEn Matematisk Beskrivelse af Mikrostrukturen i Finansielle Markeder
Original languageEnglish
PublisherSSRN: Social Science Research Network
DOIs
Publication statusPublished - 2023

Keywords

  • Metric Space
  • Financial Markets
  • Hausdorff Distance
  • Tuple

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