Price Impact Coefficients

Price impact coefficients measure the sensitivity of an asset price to changes in trade volume. These coefficients help analysts determine how much liquidity is required to move the price by a specific amount.

By calculating these values across different market conditions, one can identify if the market is becoming overly fragile or prone to manipulation. A low coefficient suggests high liquidity and resilience, while a high coefficient indicates thin markets where even small trades cause significant volatility.

These metrics are fundamental for risk management and for designing execution algorithms that minimize market impact. They provide a quantitative foundation for understanding the depth and stability of the order book in real-time.