Related papers: A Functional Limit Theorem for Limit Order Books w…
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…
This paper presents a limit order book (LOB) market mechanism design for transactive energy systems. The proposed design is planned for deployment in New Hampshire and Maine under a US Department of Energy Connected Communities project. The…
In this article, we present a discrete time modeling framework, in which the shape and dynamics of a Limit Order Book (LOB) arise endogenously from an equilibrium between multiple market participants (agents). We use the proposed modeling…
We consider a dynamic market model of liquidity where unmatched buy and sell limit orders are stored in order books. The resulting net demand surface constitutes the sole input to the model. We prove that generically there is no arbitrage…
Constant price impact functions, much used in financial literature, are shown to give rise to paradoxical outcomes since they do not allow for proper predictability removal: for instance the exploitation of a single large trade whose size…
We introduce a microscopic model for the dynamics of the order book to study how the lack of liquidity influences price fluctuations. We use the average density of the stored orders (granularity $g$) as a proxy for liquidity. This leads to…
We consider a limit order book, where buyers and sellers register to trade a security at specific prices. The largest price buyers on the book are willing to offer is called the market bid price, and the smallest price sellers on the book…
This paper proposes an Extended State-Dependent Hawkes Process (ExsdHawkes) to model the intricate dynamics of Limit Order Books (LOBs). Our theoretical contribution lies in relaxing traditional constraints by allowing for state…
In this paper we study by probabilistic techniques the convergence of the value function for a two-scale, infinite-dimensional, stochastic controlled system as the ratio between the two evolution speeds diverges. The value function is…
Most modern financial markets use a continuous double auction mechanism to store and match orders and facilitate trading. In this paper we develop a microscopic dynamical statistical model for the continuous double auction under the…
In the present paper, we study the optimal execution problem under stochastic price recovery based on limit order book dynamics. We model price recovery after execution of a large order by accelerating the arrival of the refilling order,…
Statistical and dynamical characters of stock markets have been extensively studied, which now is providing the firm basis for econophysics and its application as ``stylized facts''. However, most of those studies are for markets under the…
In this paper we study, by probabilistic techniques, the convergence of the value function for a two-scale, infinite-dimensional, stochastic controlled system as the ratio between the two evolution speeds diverges. The value function is…
Hawkes Process has been used to model Limit Order Book (LOB) dynamics in several ways in the literature however the focus has been limited to capturing the inter-event times while the order size is usually assumed to be constant. We propose…
A consistency criterion for price impact functions in limit order markets is proposed that prohibits chain arbitrage exploitation. Both the bid-ask spread and the feedback of sequential market orders of the same kind onto both sides of the…
In this paper, we propose an event-driven Limit Order Book (LOB) model that captures twelve of the most observed LOB events in exchange-based financial markets. To model these events, we propose using the state-of-the-art Neural Hawkes…
Price gap, defined as the logarithmic price difference between the first two occupied price levels on the same side of a limit order book (LOB), is a key determinant of market depth, which is one of the dimensions of liquidity. However, the…
We develop a cross-border market model for two countries based on a continuous trading mechanism, in which the transmission capacities that enable transactions between market participants from different countries are limited. Our market…
This paper proposes a parametric approach for stochastic modeling of limit order markets. The models are obtained by augmenting classical perfectly liquid market models by few additional risk factors that describe liquidity properties of…
We study how to unwind stochastic order flow with minimal transaction costs. Stochastic order flow arises, e.g., in the central risk book (CRB), a centralized trading desk that aggregates order flows within a financial institution. The desk…