Related papers: Market impact with multi-timescale liquidity
This paper focuses on an extension of the Limit Order Book (LOB) model with general shape introduced by Alfonsi, Fruth and Schied. Here, the additional feature allows a time-varying LOB depth. We solve the optimal execution problem in this…
Managing high-frequency data in a limit order book (LOB) is a complex task that often exceeds the capabilities of conventional time-series forecasting models. Accurately predicting the entire multi-level LOB, beyond just the mid-price, is…
The intraday pattern, long memory, and multifractal nature of the intertrade durations, which are defined as the waiting times between two consecutive transactions, are investigated based upon the limit order book data and order flows of 23…
In this paper we compare market price fluctuations with the response to fundamental price drops within the Lux-Marchesi model which is able to reproduce the most important stylized facts of real market data. Major differences can be…
We study a microscopic limit order book model, in which the order dynamics depend on the current best bid and ask price and the current volume density functions, simultaneously, and derive its macroscopic high-frequency dynamics. As opposed…
Modern financial exchanges use an electronic limit order book (LOB) to store bid and ask orders for a specific financial asset. As the most fine-grained information depicting the demand and supply of an asset, LOB data is essential in…
We analyze the efficiency of markets with friction, particularly power markets. We model the market as a dynamic system with $(d_t;\,t\geq 0)$ the demand process and $(s_t;\,t\geq 0)$ the supply process. Using stochastic differential…
We study the problem of pricing under a Multinomial Logit model where we incorporate network effects over the consumer's decisions. We analyse both cases, when sellers compete or collaborate. In particular, we pay special attention to the…
With the proliferation of algorithmic high-frequency trading in financial markets, the Limit Order Book has generated increased research interest. Research is still at an early stage and there is much we do not understand about the dynamics…
The Levy-Levy-Solomon model (A microscopic model of the stock market: cycles, booms, and crashes, Economic Letters 45 (1))is one of the most influential agent-based economic market models. In several publications this model has been…
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…
We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated…
The paper discusses various practical consequences of treating economics and finance as an inherently dynamic and chaotic system. On the theoretical side this looks at the general applicability of the market-making pricing approach to…
Market by order (MBO) data - a detailed feed of individual trade instructions for a given stock on an exchange - is arguably one of the most granular sources of microstructure information. While limit order books (LOBs) are implicitly…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
Statistical properties of an order book and the effect they have on price dynamics were studied using the high-frequency NASDAQ Level II data. It was observed that the size distribution of marketable orders (transaction sizes) has power law…
This paper is split in three parts: first we use labelled trade data to exhibit how market participants accept or not transactions via limit orders as a function of liquidity imbalance; then we develop a theoretical stochastic control…
In financial markets, liquidity is not constant over time but exhibits strong seasonal patterns. In this article we consider a limit order book model that allows for time-dependent, deterministic depth and resilience of the book and…
Many independent studies on stocks and futures contracts have established that market impact is proportional to the square-root of the executed volume. Is market impact quantitatively similar for option markets as well? In order to answer…
Long-range correlation in financial time series reflects the complex dynamics of the stock markets driven by algorithms and human decisions. Our analysis exploits ultra-high frequency order book data from NASDAQ Nordic over a period of…