Related papers: Market Dynamics vs. Statistics: Limit Order Book E…
We propose a class of stochastic models for a dynamics of limit order book with different type of liquidities. Within this class of models we study the one where a spread decreases uniformly, belonging to the class of processes known as a…
Equity auctions display several distinctive characteristics in contrast to continuous trading. As the auction time approaches, the rate of events accelerates causing a substantial liquidity buildup around the indicative price. This, in…
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…
We propose a static equilibrium model for limit order book where profit-maximizing investors receive an information signal regarding the liquidation value of the asset and execute via a competitive dealer with random initial inventory, who…
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…
We introduce a Cox-type model for relative intensities of orders flows in a limit order book. The model assumes that all intensities share a common baseline intensity, which may for example represent the global market activity. Parameters…
We propose a framework for studying optimal market making policies in a limit order book (LOB). The bid-ask spread of the LOB is modelled by a Markov chain with finite values, multiple of the tick size, and subordinated by the Poisson…
Order positions are key variables in algorithmic trading. This paper studies the limiting behavior of order positions and related queues in a limit order book. In addition to the fluid and diffusion limits for the processes, fluctuations of…
We show that the statistics of spreads in real order books is characterized by an intrinsic asymmetry due to discreteness effects for even or odd values of the spread. An analysis of data from the NYSE order book points out that traders'…
We propose a limit order book (LOB) model with dynamics that account for both the impact of the most recent order and the shape of the LOB. We present an empirical analysis showing that the type of the last order significantly alters the…
The study of order volumes in financial markets has shown that these display several non-trivial statistical properties. Most studies have been focused on the bulk properties of volume of incoming orders or of realized transactions rather…
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…
Classic market design theory is rooted in static models where all participants trade simultaneously. In contrast, modern platform-mediated digital markets are fundamentally dynamic, defined by the asynchronous and stochastic arrival of…
We report a statistical analysis of the Island ECN (NASDAQ) order book. We determine the static and dynamic properties of this system, and then analyze them from a physicist's viewpoint using an equivalent particle system obtained by…
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…
An empirical stochastic analysis of high-frequency, tick-by-tick order data of NASDAQ100 listed stocks is conducted using a first-order discrete-time Markov chain model to explore intraday order transition dynamics. This analysis focuses on…
Statistical mechanics provides a useful analog for understanding the behavior of complex adaptive systems, including power markets and the power systems they intend to govern. Transaction-based control is founded on the conjecture that the…
We develop a behavioral model for liquidity and volatility based on empirical regularities in trading order flow in the London Stock Exchange. This can be viewed as a very simple agent based model in which all components of the model are…
The coordinated and efficient distribution of limited resources by individual decisions is a fundamental, unsolved problem. When individuals compete for road capacities, time, space, money, goods, etc., they normally make decisions based on…
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…