Related papers: Liquidity crises on different time scales
Many complex systems exhibit extreme events far more often than expected for a normal distribution. This work examines how self-similar bursts of activity across several orders of magnitude can emerge from first principles in systems that…
Recent developments in the global liberalization of equity and currency markets, coupled to advances in trading technologies, are making markets increasingly interdependent. This increased fluidity raises questions about the stability of…
Many commonly used liquidity measures are based on snapshots of the state of the limit order book (LOB) and can thus only provide information about instantaneous liquidity, and not regarding the local liquidity regime. However, trading in…
We propose a microscopic model to describe the dynamics of the fundamental events in the limit order book (LOB): order arrivals and cancellations. It is based on an operator algebra for individual orders and describes their effect on the…
Measuring systemic risk or fragility of financial systems is a ubiquitous task of fundamental importance in analyzing market efficiency, portfolio allocation, and containment of financial contagions. Recent attempts have shown that…
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 present a model that investigates the spontaneous emergence of randomness in equity market microstructure. The phase space analysis of our model exposes an endogenous source of fluctuation in price and volume. We formulate a control…
We present a large-scale study of commonality in liquidity and resilience across assets in an ultra high-frequency (millisecond-timestamped) Limit Order Book (LOB) dataset from a pan-European electronic equity trading facility. We first…
Leverage is strongly related to liquidity in a market and lack of liquidity is considered a cause and/or consequence of the recent financial crisis. A repurchase agreement is a financial instrument where a security is sold simultaneously…
Volume imbalance in a limit order book is often considered as a reliable indicator for predicting future price moves. In this work, we seek to analyse the nuances of the relationship between prices and volume imbalance. To this end, we…
We propose a structural framework for the geometry of financial order books in which liquidity, supply, and demand are treated as emergent observables rather than primitive economic variables. The market is modeled as an inflationary…
Fluctuations in a fluid are strongly affected by the presence of a macroscopic gradient making them long-ranged and enhancing their amplitude. While small-scale fluctuations exhibit diffusive lifetimes, larger-scale fluctuations live…
We show that hyperscaling and finite-size scaling imply that the probability distribution of the order parameter in finite size critical systems exhibit data collapse. We consider the examples of equilibrium critical systems, and a…
A liquidity measure based on consideration and price range is proposed. Initially defined for daily data, Liquidity Index (LIX) can also be estimated via intraday data by using a time scaling mechanism. The link between LIX and the…
While the long-ranged correlation of market orders and their impact on prices has been relatively well studied in the literature, the corresponding studies of limit orders and cancellations are scarce. We provide here an empirical study of…
To identify emerging interdependencies between traded stocks we investigate the behavior of the stocks of FTSE 100 companies in the period 2000-2015, by looking at daily stock values. Exploiting the power of information theoretical measures…
We analyse all Mini Flash Crashes (or Flash Equity Failures) in the US equity markets in the four most volatile months during 2006-2011. In contrast to previous studies, we find that Mini Flash Crashes are the result of regulation framework…
We postulates, and then show experimentally, that liquidity deficit is the driving force of the markets. In the first part of the paper a kinematic of liquidity deficit is developed. The calculus-like approach, which is based on…
We show that the cost of market orders and the profit of infinitesimal market-making or -taking strategies can be expressed in terms of directly observable quantities, namely the spread and the lag-dependent impact function. Imposing that…
We show, by studying in detail the market prices of options on liquid markets, that the market has empirically corrected the simple, but inadequate Black-Scholes formula to account for two important statistical features of asset…