I am reading this paper and trying to apply it with real data to do some simulations.
I will use realtime order book & market order data that I will receive from the exchange. This is a sample of the market order data(You can say execution data or tick data too).
side price size execution_date BUY 100 1.5 2018-08-06T03:24:29.023
Using these data, I can't figure out how to find some parameters for the function below.
γ = Risk parameter, σ = Volatility, T = Terminal time, t = Current time, k = Trading intensity
I do not know how to compute parameter σ & k. I assume that σ would be the standard deviation by the previous few seconds of tick data.
And for k, using the total volume of previous few seconds of market orders and the current limit order book, we can know the temporary market impact. But I am not sure how to fit these information into parameter k.
I hope someone could give some help and advice how to find these parameters.