Related papers: Order book dynamics in liquid markets: limit theor…
We use standard physics techniques to model trading and price formation in a market under the assumption that order arrival and cancellations are Poisson random processes. This model makes testable predictions for the most basic properties…
We introduce a model for limit order book of a certain security with two main features: First, both the limit orders and market orders for the given asset are allowed to appear and interact with each other. Second, the high frequency…
In the domain of the so called Econophysics some attempts already have been made for applying the theory of Thermodynamics and Statistical Mechanics to economics and financial markets. In this paper a similar approach is made from a…
Ordinary differential equations obtained as limits of Markov processes appear in many settings. They may arise by scaling large systems, or by averaging rapidly fluctuating systems, or in systems involving multiple time-scales, by a…
We introduce a Markovian single point process model, with random intensity regulated through a buffer mechanism and a self-exciting effect controlling the arrival stream to the buffer. The model applies the principle of the Hawkes process…
In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how fluctuations in supply and demand are slowly…
We show that multivariate Hawkes processes coupled with the nonparametric estimation procedure first proposed in Bacry and Muzy (2015) can be successfully used to study complex interactions between the time of arrival of orders and their…
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…
We propose a microstructural modeling framework for studying optimal market making policies in a FIFO (first in first out) limit order book (LOB). In this context, the limit orders, market orders, and cancel orders arrivals in the LOB are…
It has been suggested that marked point processes might be good candidates for the modelling of financial high-frequency data. A special class of point processes, Hawkes processes, has been the subject of various investigations in the…
We identify and analyze statistical regularities and irregularities in the recent order flow of different NASDAQ stocks, focusing on the positions where orders are placed in the orderbook. This includes limit orders being placed outside of…
In this paper we study a continuous time equilibrium model of limit order book (LOB) in which the liquidity dynamics follows a non-local, reflected mean-field stochastic differential equation (SDE) with evolving intensity. Generalizing the…
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…
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…
This paper establishes limit theorems for a class of stochastic hybrid systems (continuous deterministic dynamic coupled with jump Markov processes) in the fluid limit (small jumps at high frequency), thus extending known results for jump…
We investigate whether the bid/ask queue imbalance in a limit order book (LOB) provides significant predictive power for the direction of the next mid-price movement. We consider this question both in the context of a simple binary…
We study a parsimonious but non-trivial model of the latent limit order book where orders get placed with a fixed displacement from a center price process, i.e.\ some process in-between best bid and best ask, and get executed whenever this…
We set out a general procedure which allows the approximation of certain Markov chains by the solutions of differential equations. The chains considered have some components which oscillate rapidly and randomly, while others are close to…
Quantitative understanding of stochastic dynamics in limit order price changes is essential for execution strategy design. We analyze intraday transition dynamics of ask and bid orders across market capitalization tiers using high-frequency…
Motivated by a zero-intelligence approach, the aim of this paper is to connect the microscopic (discrete price and volume), mesoscopic (discrete price and continuous volume) and macroscopic (continuous price and volume) frameworks for the…