Related papers: Feedback and efficiency in limit order markets
We propose a unified mean-field framework that bridges the dynamics of informal financial markets and formal markets governed by Limit Order Books (LOBs). Both settings are modeled as interacting particle systems on a 1D price lattice, with…
We examine the correlation of the limit price with the order book, when a limit order comes. We analyzed the Rebuild Order Book of Stock Exchange Electronic Trading Service, which is the centralized order book market of London Stock…
This paper deals with a fundamental subject that has seldom been addressed in recent years, that of market impact in the options market. Our analysis is based on a proprietary database of metaorders-large orders that are split into smaller…
Through the analysis of a dataset of ultra high frequency order book updates, we introduce a model which accommodates the empirical properties of the full order book together with the stylized facts of lower frequency financial data. To do…
We present a measurement of price impact in order-driven markets that does not require averages across executions or scenarios. Given the order book data associated with one single execution of a sell metaorder, we measure its contribution…
The prevention of rapidly and steeply falling market prices is vital to avoid financial crisis. To this end, some stock exchanges implement a price limit or a circuit breaker, and there has been intensive investigation into which regulation…
We define what "Price Impact" means, and how it is measured and modelled in the recent literature. Although this notion seems to convey the idea of a forceful and intuitive mechanism, we discuss why things might not be that simple.…
We propose a static equilibrium model for limit order book where profit-maximizing investors receive an information signal regarding the liquidation value of the asset and execute via a competitive dealer with random initial inventory, who…
We investigate the behavior of limit order books on the meso-scale motivated by order execution scheduling algorithms. To do so we carry out empirical analysis of the order flows from market and limit order submissions, aggregated from…
In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…
We present a study of price impact in the over-the-counter credit index market, where no limit order book is used. Contracts are traded via dealers, that compete for the orders of clients. Despite this distinct microstructure, we…
How and why stock prices move is a centuries-old question still not answered conclusively. More recently, attention shifted to higher frequencies, where trades are processed piecewise across different timescales. Here we reveal that price…
Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…
With the fragmentation of electronic markets, exchanges are now competing in order to attract trading activity on their platform. Consequently, they developed several regulatory tools to control liquidity provision / consumption on their…
We study the price impact of order book events - limit orders, market orders and cancelations - using the NYSE TAQ data for 50 U.S. stocks. We show that, over short time intervals, price changes are mainly driven by the order flow…
Recent research on the response of stock prices to trading activity revealed long lasting effects, even across stocks of different companies. These results imply non-Markovian effects in price formation and when trading many stocks at the…
A limit order book provides information on available limit order prices and their volumes. Based on these quantities, we give an empirical result on the relationship between the bid-ask liquidity balance and trade sign and we show that…
Conventional models of matching markets assume that monetary transfers can clear markets by compensating for utility differentials. However, empirical patterns show that such transfers often fail to close structural preference gaps. This…
We show that the cost of market orders and the profit of infinitesimal market-making or -taking strategies can be expressed in terms of directly observable quantities, namely the spread and the lag-dependent impact function. Imposing that…
The available liquidity at any time in financial markets falls largely short of the typical size of the orders that institutional investors would trade. In order to reduce the impact on prices due to the execution of large orders, traders…