Related papers: Market Dynamics vs. Statistics: Limit Order Book E…
We briefly review data analysis of the Island order book, part of NASDAQ, which suggests a framework to which all limit order markets should comply. Using a simple exclusion particle model, we argue that short-time price over-diffusion in…
We consider the optimal solutions to the trade execution problem in the two different classes of i) fully adapted or adaptive and ii) deterministic or static strategies, comparing them. We do this in two different benchmark models. The…
We propose a simple stochastic model of market behavior. Dividing market participants into two groups: trend-followers and fundamentalists, we derive the general form of a stochastic equation of market dynamics. The model has two…
In an adaptive population which models financial markets and distributed control, we consider how the dynamics depends on the diversity of the agents' initial preferences of strategies. When the diversity decreases, more agents tend to…
An attempt to obtain market directional information from non-stationary solution of the dynamic equation: "future price tends to the value maximizing the number of shares traded per unit time" is presented. A remarkable feature of the…
An ability to postpone one's execution without penalty provides an important strategic advantage in high-frequency trading. To elucidate competition between traders one has to formulate to a quantitative theory of formation of the execution…
This paper investigates the structural dynamics of stock market volatility through the Financial Chaos Index, a tensor- and eigenvalue-based measure designed to capture realized volatility via mutual fluctuations among asset prices.…
In this paper we develop a model of an order-driven market where traders set bids and asks and post market or limit orders according to exogenously fixed rules. Agents are assumed to have three components to the expectation of future asset…
Financial markets change their behaviours abruptly. The mean, variance and correlation patterns of stocks can vary dramatically, triggered by fundamental changes in macroeconomic variables, policies or regulations. A trader needs to adapt…
I present an overview of some recent advancements on the empirical analysis and theoretical modeling of the process of price formation in financial markets as the result of the arrival of orders in a limit order book exchange. After…
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…
We utilize a chartist-fundamentalist model to examine the limits of informationally efficient stock markets. In our model, chartists are permanently active in the stock market, while fundamentalists trade only when their…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
We consider a stochastic model for the dynamics of the two-sided limit order book (LOB). Our model is flexible enough to allow for a dependence of the price dynamics on volumes. For the joint dynamics of best bid and ask prices and the…
Systems that exhibit complex behaviours are often found in a particular dynamical condition, poised between order and disorder. This observation is at the core of the so-called criticality hypothesis, which states that systems in a…
We study the price impact of order book events - limit orders, market orders and cancelations - using the NYSE TAQ data for 50 U.S. stocks. We show that, over short time intervals, price changes are mainly driven by the order flow…
A methodology is developed to identify, as units of study, each decrease in the value of a stock from a given maximum price level. A critical level in the amount of price declines is found to separate a segment operating under a random walk…
It has been long that literature in financial academics focuses mainly on price and return but much less on trading volume. In the past twenty years, it has already linked both price and trading volume to economic fundamentals, and explored…
We consider a broker who has to place a large order which consumes a sizable part of average daily trading volume. The broker's aim is thus to minimize execution costs he incurs from the adverse impact of his trades on market prices. By…
Using frequency distributions of daily closing price time series of several financial market indexes, we investigate whether the bias away from an equiprobable sequence distribution found in the data, predicted by algorithmic information…