Related papers: Feedback and efficiency in limit order markets
We study the optimal execution of market and limit orders with permanent and temporary price impacts as well as uncertainty in the filling of limit orders. Our continuous-time model incorporates a trade speed limiter and a trader director…
We extend a linear version of the liquidity risk model of Cetin et al. (2004) to allow for price impacts. We show that the impact of a market order on prices depends on the size of the transaction and the level of liquidity. We obtain a…
By studying all the trades and best bids/asks of ultra high frequency snapshots recorded from the order books of a basket of 10 futures assets, we bring qualitative empirical evidence that the impact of a single trade depends on the…
We consider a stochastic model for the dynamics of the two-sided limit order book (LOB). Our model is flexible enough to allow for a dependence of the price dynamics on volumes. For the joint dynamics of best bid and ask prices and the…
We introduce a Cox-type model for relative intensities of orders flows in a limit order book. The model assumes that all intensities share a common baseline intensity, which may for example represent the global market activity. Parameters…
This paper focuses on the operation of an electricity market that accounts for participants that bid at a sub-minute timescale. To that end, we model the market-clearing process as a dynamical system, called market dynamics, which is…
In this paper we demonstrate a striking regularity in the way people place limit orders in financial markets, using a data set consisting of roughly seven million orders from the London Stock Exchange. We define the relative limit price as…
We propose a dynamical theory of market liquidity that predicts that the average supply/demand profile is V-shaped and {\it vanishes} around the current price. This result is generic, and only relies on mild assumptions about the order flow…
We argue that contemporary stock market designs are, due to traders' inability to fully express their preferences over the execution times of their orders, prone to latency arbitrage. In turn, we propose a new order type which allows…
We study an online market-making problem in which a learner sequentially posts bid and ask prices for a single asset while interacting with traders holding private valuations. Unlike existing online learning formulations that assume fully…
There is a pervasive assumption that low latency access to an exchange is a key factor in the profitability of many high-frequency trading strategies. This belief is evidenced by the "arms race" undertaken by certain financial firms to…
Financial markets can be described on several time scales. We use data from the limit order book of the London Stock Exchange (LSE) to compare how the fluctuation dominated microstructure crosses over to a more systematic global behavior.
We study the analytical properties of a one-side order book model in which the flows of limit and market orders are Poisson processes and the distribution of lifetimes of cancelled orders is exponential. Although simplistic, the model…
Recent technological developments have changed the fundamental ways stock markets function, bringing regulatory instances to assess the benefits of these developments. In parallel, the ongoing machine learning revolution and its multiple…
We develop an empirical behavioural order-driven (EBOD) model, which consists of an order placement process and an order cancellation process. Price limit rules are introduced in the definition of relative price. The order placement process…
Recent regulation on intraday electricity markets has led to the development of shared order books with the intention to foster competition and increase market liquidity. In this paper, we address the question of the efficiency of such…
Order book dynamics play an important role in both execution time and price formation of orders in an exchange market. In this study, we aim to model the limit order arrival rates in the vicinity of the best bid and the best ask price…
Although behavioral economics has demonstrated that there are many situations where rational choice is a poor empirical model, it has so far failed to provide quantitative models of economic problems such as price formation. We make a step…
We study the problem of the execution of a moderate size order in an illiquid market within the framework of a solvable Markovian model. We suppose that in order to avoid impact costs, a trader decides to execute her order through a unique…
We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical…