Related papers: Order book dynamics in liquid markets: limit theor…
In this paper, we introduce a parametrized family of prices derived from the Maximum Entropy Principle. The price is obtained from the distribution that minimizes bias, given the bid and ask volume imbalance at the top of the order book.…
We consider a framework for solving optimal liquidation problems in limit order books. In particular, order arrivals are modeled as a point process whose intensity depends on the liquidation price. We set up a stochastic control problem in…
We study the dynamics of order flows around large intraday price changes using ultra-high-frequency data from the Shenzhen Stock Exchange. We find a significant reversal of price for both intraday price decreases and increases with a…
Modeling limit order books (LOBs) dynamics is a fundamental problem in market microstructure research. In particular, generating high-dimensional volume snapshots with strong temporal and liquidity-dependent patterns remains a challenging…
We introduce a new model in order to describe the fluctuation of tick-by-tick financial time series. Our model, based on marked point process, allows us to incorporate in a unique process the duration of the transaction and the…
This paper introduces a jump-diffusion pricing model specifically designed for algorithmic trading and high-frequency trading (HFT). The model incorporates independent jump and diffusion processes, providing a more precise representation of…
Modeling the impact of the order flow on asset prices is of primary importance to understand the behavior of financial markets. Part I of this paper reported the remarkable improvements in the description of the price dynamics which can be…
A novel high-frequency market-making approach in discrete time is proposed that admits closed-form solutions. By taking advantage of demand functions that are linear in the quoted bid and ask spreads with random coefficients, we model the…
We study a double-ended queue where buyers and sellers arrive to conduct trades. When there is a pair of buyer and seller in the system, they immediately transact a trade and leave. Thus there cannot be non-zero number of buyers and sellers…
A point process for event arrivals in high frequency trading is presented. The intensity is the product of a Hawkes process and high dimensional functions of covariates derived from the order book. Conditions for stationarity of the process…
The existing literature provides evidence that limit order book data can be used to predict short-term price movements in stock markets. This paper proposes a new neural network architecture for predicting return jump arrivals in equity…
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…
In this paper we present a novel approach to the determination of fat tails in financial data by studying the information contained in the limit order book. In an order-driven market buyers and sellers may submit limit orders, which are…
We present a Markovian market model driven by a hidden Brownian efficient price. In particular, we extend the queue-reactive model, making its dynamics dependent on the efficient price. Our study focuses on two sub-models: a signal-driven…
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…
We consider a simple model for the evolution of a limit order book in which limit orders of unit size arrive according to independent Poisson processes. The frequencies of buy limit orders below a given price level, respectively sell limit…
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…
This paper introduces a discrete limit order book model where new orders are placed with a fixed displacement from the mid-price. Further, the trade event occurs whenever the mid-price hits the price level on which there is some volume.…
In this paper we investigate a dynamic pricing model for constant demand elasticity where customers have a probability distribution on the number of items they order. This is a generalization from standard models which restrict customers to…
With the proliferation of algorithmic high-frequency trading in financial markets, the Limit Order Book has generated increased research interest. Research is still at an early stage and there is much we do not understand about the dynamics…