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Résumé

No Arbitrage and the Decay of Market Impact

Jim Gatheral

Starting from an expression for the price process that generalizes previous work, we formulate a no-dynamic-arbitrage principle analogous to that of Huberman and Stanzl. We show that this principle imposes a relationship between the shape of the market impact function and the decay of temporary market impact. We review some conventional market impact models and explore some implications of no-dynamic-arbitrage.

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