Chapter 8: Nonlinear Regression Models
Introduction
Nonlinear regression consists of models that have a nonlinear formulation and cannot be linearized via transformations. One of the most “infamous” nonlinear regression models is the I-Star Market Impact Model introduced by Kissell & Malamut (1999). This model is used extensively for electronic, algorithmic, and high frequency trading. See Kissell et al. (2004), Kissell & Malamut (2006), or Kissell (2013) for an overview of this model and its applications. The estimation of this model is also provided in Chapter 10 (Estimating Market Impact Models).
The I-Star model has form:
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