Calibration of Passive Market Impact with a Queue-Sensitive Propagator Model
Abstract
We develop a framework for calibrating passive market impact, defined as the price response to liquidity-providing limit orders, in contrast to the impact of liquidity-consuming market orders. We build on the model of Ouazzani Chahdi, Rosenbaum, and Szymanski (arxiv:2412.07461), which combines Hawkes-driven market-order flow with queue-reactive limit-order and cancellation dynamics. Within this model, we show that the price decomposes into a universal propagator term driven by signed order-flow imbalance and a state-dependent correction that captures the dependence of price sensitivity on volume at the best quotes. This decomposition links limit-order-book microstructure to standard propagator models and yields a regression on two observable signals: the propagator signal and the queue-weighted order-flow imbalance. We calibrate the model on high-frequency order-book data and find that the passive-impact term explains substantial variation in prices beyond the classical propagator, improving both model fit and the accuracy of predicted impact curves.
Related
- Event-Time Order-Flow Memory, Operational-Time Impact, and Subordinated Market Observables
- Mean-field equilibrium of heterogeneous agents under market impact
- Endpoint maximal estimates for the half-wave propagator
- Continuity properties of the Laguerre operator and its propagator
- Spectral Density of the Causal Propagator
BibTeX
@misc{hafsi2026calibration,
title = {{Calibration of Passive Market Impact with a Queue-Sensitive Propagator Model}},
author = {Yadh Hafsi and Fabrizio Lillo and Grégoire Szymanski},
howpublished = {arXiv},
year = {2026},
month = oct,
doi = {10.48550/arxiv.2610.38442},
eprint = {2610.38442},
archivePrefix = {arXiv},
url = {https://arxiv.org/abs/2610.38442},
}
RIS
TY - UNPB
TI - Calibration of Passive Market Impact with a Queue-Sensitive Propagator Model
AU - Yadh Hafsi
AU - Fabrizio Lillo
AU - Grégoire Szymanski
PY - 2026
DA - 2026/10/28
PB - arXiv
DO - 10.48550/arxiv.2610.38442
UR - https://arxiv.org/abs/2610.38442
AB - We develop a framework for calibrating passive market impact, defined as the price response to liquidity-providing limit orders, in contrast to the impact of liquidity-consuming market orders. We build on the model of Ouazzani Chahdi, Rosenbaum, and Szymanski (arxiv:2412.07461), which combines Hawkes-driven market-order flow with queue-reactive limit-order and cancellation dynamics. Within this model, we show that the price decomposes into a universal propagator term driven by signed order-flow imbalance and a state-dependent correction that captures the dependence of price sensitivity on volume at the best quotes. This decomposition links limit-order-book microstructure to standard propagator models and yields a regression on two observable signals: the propagator signal and the queue-weighted order-flow imbalance. We calibrate the model on high-frequency order-book data and find that the passive-impact term explains substantial variation in prices beyond the classical propagator, improving both model fit and the accuracy of predicted impact curves.
ER -