Related papers: Feedback and efficiency in limit order markets
The latent order book of \cite{donier2015fully} is one of the most promising agent-based models for market impact. This work extends the minimal model by allowing agents to exhibit mean-reversion, a commonly observed pattern in real…
We provide an explicit characterization of the optimal market making strategy in a discrete-time Limit Order Book (LOB). In our model, the number of filled orders during each period depends linearly on the distance between the fundamental…
The trade size $\omega$ has direct impact on the price formation of the stock traded. Econophysical analyses of transaction data for the US and Australian stock markets have uncovered market-specific scaling laws, where a master curve of…
Under proportional transaction costs, a price process is said to have a consistent price system, if there is a semimartingale with an equivalent martingale measure that evolves within the bid-ask spread. We show that a continuous,…
Digital marketplaces processing billions of dollars annually represent critical infrastructure in sociotechnical ecosystems, yet their performance optimization lacks principled measurement frameworks that can inform algorithmic governance…
We study the problem of what causes prices to change. We define the mechanical impact of a trading order as the change in future prices in the absence of any future changes in decision making, and its it informational impact as the…
We analyze an optimal trade execution problem in a financial market with stochastic liquidity. To this end we set up a limit order book model in which both order book depth and resilience evolve randomly in time. Trading is allowed in both…
Research on limit order book markets has been rapidly growing and nowadays high-frequency full order book data is widely available for researchers and practitioners. However, it is common that research papers use the best level data only,…
At the ultra high frequency level, the notion of price of an asset is very ambiguous. Indeed, many different prices can be defined (last traded price, best bid price, mid price,...). Thus, in practice, market participants face the problem…
We carry out a detailed large-scale data analysis of price response functions in the spot foreign exchange market for different years and different time scales. Such response functions provide quantitative information on the deviation from…
We study the relaxation dynamics of the bid-ask spread and of the midprice after a sudden, large variation of the spread, corresponding to a temporary crisis of liquidity in a double auction financial market. We find that the spread decays…
We derive a continuous time model for the joint evolution of the mid price and the bid-ask spread from a multiscale analysis of the whole limit order book (LOB) dynamics. We model the LOB as a multiclass queueing system and perform our…
We revisit the classic Cournot model and extend it to a two-echelon supply chain with an upstream supplier who operates under demand uncertainty and multiple downstream retailers who compete over quantity. The supplier's belief about retail…
The takeoff point of this paper is to generalize the existing stock trading results for a class of affine feedback controller to include consideration of a stop-loss order. Using the geometric Brownian motion as the underlying stock price…
We study a microscopic limit order book model, in which the order dynamics depend on the current best bid and ask price and the current volume density functions, simultaneously, and derive its macroscopic high-frequency dynamics. As opposed…
We study the cause of large fluctuations in prices in the London Stock Exchange. This is done at the microscopic level of individual events, where an event is the placement or cancellation of an order to buy or sell. We show that price…
We study how storage, operating as a price maker within a market environment, may be optimally operated over an extended period of time. The optimality criterion may be the maximisation of the profit of the storage itself, where this profit…
Results from the communication complexity literature have demonstrated that stable matching requires communication: one cannot find or verify a stable match without having access to essentially all of the ordinal preference information held…
In a financial exchange, market impact is a measure of the price change of an asset following a transaction. This is an important element of market microstructure, which determines the behaviour of the market following a trade. In this…
We present an empirical analysis of the microstructure of financial markets and, in particular, of the static and dynamic properties of liquidity. We find that on relatively large time scales (15 minutes) large price fluctuations are…