Related papers: A limit order book model for latency arbitrage

We study the dynamics of the limit order book of liquid stocks after experiencing large intra-day price changes. In the data we find large variations in several microscopical measures, e.g., the volatility the bid-ask spread, the bid-ask…

We study a new "laminated" queueing model for orders on batched trading venues such as decentralised exchanges. The model aims to capture and generalise transaction queueing infrastructure that has arisen to organise MEV activity on public…

R. Cont and A. de Larrard (SIAM J. Finan. Math, 2013) introduced a tractable stochastic model for the dynamics of a limit order book, computing various quantities of interest such as the probability of a price increase or the diffusion…

We propose a new model for the level I of a Limit Order Book (LOB), which incorporates the information about the standing orders at the opposite side of the book after each price change and the arrivals of new orders within the spread. Our…

Since they were authorized by the U.S. Security and Exchange Commission in 1998, electronic exchanges have boomed, and by 2010 high frequency trading accounted for over 70% of equity trades in the US. Such markets are thought to increase…

We formulate a simplified model of a limit order book, in which the arrival process is independent of the current state. We prove a phase transition result: there exist prices $\kappa_b$ and $\kappa_a$ such that, for any $\epsilon > 0$,…

I present an overview of some recent advancements on the empirical analysis and theoretical modeling of the process of price formation in financial markets as the result of the arrival of orders in a limit order book exchange. After…

In financial applications, latency advantages -- the ability to make decisions later than others, even without the ability to see what others have done -- can provide individual participants with an edge by allowing them to gather…

This paper studies four trading algorithms of a professional trader at a multilateral trading facility, observing a realistic two-sided limit order book whose dynamics are driven by the order book events. The identity of the trader can be…

We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…

A consumer who wants to consume a good in a particular period may nevertheless attempt to buy it earlier if he is concerned that in delaying he would find the good already sold. This paper considers a model in which the good may be offered…

This paper examines the role of algorithmic trading in modern financial markets. Additionally, order types, characteristics, and special features of algorithmic trading are described under the lens provided by the large development of high…

We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a…

Using more than 6.7 billions of trades, we explore how the tick-by-tick dynamics of limit order books depends on the aggregate actions of large investment funds on a much larger (quarterly) timescale. In particular, we find that the…

We propose a price impact model where changes in prices are purely driven by the order flow in the market. The stochastic price impact of market orders and the arrival rates of limit and market orders are functions of the market liquidity…

Market making refers to a form of trading in financial markets characterized by passive orders which add liquidity to limit order books. Market makers are important for the proper functioning of financial markets worldwide. Given the…

We prove the existence of a continuous-time Radner equilibrium with multiple agents and transaction costs. The agents are incentivized to trade towards a targeted number of shares throughout the trading period and seek to maximize their…

This paper studies the trading volumes and wealth distribution of a novel agent-based model of an artificial financial market. In this model, heterogeneous agents, behaving according to the Von Neumann and Morgenstern utility theory, may…

The distribution of returns in financial time series exhibits heavy tails. In empirical studies, it has been found that gaps between the orders in the order book lead to large price shifts and thereby to these heavy tails. We set up an…

We consider the problem of the optimal trading strategy in the presence of linear costs, and with a strict cap on the allowed position in the market. Using Bellman's backward recursion method, we show that the optimal strategy is to switch…