Related papers: An empirical behavioural order-driven model with p…
The order submission and cancelation processes are two crucial aspects in the price formation of stocks traded in order-driven markets. We investigate the dynamics of order cancelation by studying the statistical properties of…
We derive a continuous time model for the joint evolution of the mid price and the bid-ask spread from a multiscale analysis of the whole limit order book (LOB) dynamics. We model the LOB as a multiclass queueing system and perform our…
In this study, we introduce a physical model inspired by statistical physics for predicting price volatility and expected returns by leveraging Level 3 order book data. By drawing parallels between orders in the limit order book and…
Order book imbalance (OBI) - buy orders minus sell orders near the best quote - measures supply-demand imbalance that can move prices. OBI is positively correlated with returns, and some investors try to use it to improve performance. Large…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
In this paper we introduce a completely continuous and time-variate model of the evolution of market limit orders based on the existence, uniqueness, and regularity of the solutions to a type of stochastic partial differential equations…
We introduce the Estimated Dynamic Equilibrium Model (EDEM), an agent-based framework that treats supply and demand as a coupled stochastic process driven by heterogeneous, noisy agent valuations. The model's primary technical contribution…
We present an empirical study of the first passage time (FPT) of order book prices needed to observe a prescribed price change Delta, the time to fill (TTF) for executed limit orders and the time to cancel (TTC) for canceled ones in a…
Buying and selling stocks causes price changes, which are described by the price impact function. To explain the shape of this function, we study the Island ECN orderbook. In addition to transaction data, the orderbook contains information…
We build on theoretical results from the mechanism design literature to analyze empirical models of second-degree price discrimination (2PD). We show that for a random-coefficients discrete choice ("BLP") model to be suitable for studying…
The available liquidity at any time in financial markets falls largely short of the typical size of the orders that institutional investors would trade. In order to reduce the impact on prices due to the execution of large orders, traders…
In the supermarket model there are n queues, each with a unit rate server. Customers arrive in a Poisson process at rate \lambda n, where 0<\lambda <1. Each customer chooses d > 2 queues uniformly at random, and joins a shortest one. It is…
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 investigate several statistical properties of the order book of three liquid stocks of the Paris Bourse. The results are to a large degree independent of the stock studied. The most interesting features concern (i) the statistics of…
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…
We consider a periodical equilibrium pricing problem for multiple firms over a planning horizon of T periods. At each period, firms set their selling prices and receive stochastic demand from consumers. Firms do not know their underlying…
We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible…
We present a simple dynamic equilibrium model for an online exchange where both buyers and sellers arrive according to a exogenously defined stochastic process. The structure of this exchange is motivated by the limit order book mechanism…
This paper is devoted to the important yet little explored subject of the market impact of limit orders. Our analysis is based on a proprietary database of metaorders - large orders that are split into smaller pieces before being sent to…
As a firm varies the price of a product, consumers exhibit reference effects, making purchase decisions based not only on the prevailing price but also the product's price history. We consider the problem of learning such behavioral…