Related papers: Market Making under a Weakly Consistent Limit Orde…
We propose a new model for the level I of a Limit Order Book (LOB), which incorporates the information about the standing orders at the opposite side of the book after each price change and the arrivals of new orders within the spread. Our…
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…
The modeling of the limit order book is directly related to the assumptions on the behavior of real market participants. This paper is twofold. We first present empirical findings that lay the ground for two improvements to these models.The…
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…
In this paper, we propose an event-driven Limit Order Book (LOB) model that captures twelve of the most observed LOB events in exchange-based financial markets. To model these events, we propose using the state-of-the-art Neural Hawkes…
Through the analysis of a dataset of ultra high frequency order book updates, we introduce a model which accommodates the empirical properties of the full order book together with the stylized facts of lower frequency financial data. To do…
In this paper we propose a dynamic model of Limit Order Book (LOB). The main feature of our model is that the shape of the LOB is determined endogenously by an expected utility function via a competitive equilibrium argument. Assuming zero…
This study pioneers the application of the market microstructure framework to an informal financial market. By scraping data from websites and social media about the Cuban informal currency market, we model the dynamics of bid/ask…
Limit Order Books (LOBs) serve as a mechanism for buyers and sellers to interact with each other in the financial markets. Modelling and simulating LOBs is quite often necessary for calibrating and fine-tuning the automated trading…
Market makers continuously set bid and ask quotes for the stocks they have under consideration. Hence they face a complex optimization problem in which their return, based on the bid-ask spread they quote and the frequency at which they…
Since they were authorized by the U.S. Security and Exchange Commission in 1998, electronic exchanges have boomed, and by 2010 high frequency trading accounted for over 70% of equity trades in the US. Such markets are thought to increase…
Introducing an algebraic framework for modeling limit order books (LOBs) with tools from physics and stochastic processes, our proposed framework captures the creation and annihilation of orders, order matching, and the time evolution of…
In this article, we present a discrete time modeling framework, in which the shape and dynamics of a Limit Order Book (LOB) arise endogenously from an equilibrium between multiple market participants (agents). We use the proposed modeling…
Latency (i.e., time delay) in electronic markets affects the efficacy of liquidity taking strategies. During the time liquidity takers process information and send marketable limit orders (MLOs) to the exchange, the limit order book (LOB)…
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…
High-frequency market making is a liquidity-providing trading strategy that simultaneously generates many bids and asks for a security at ultra-low latency while maintaining a relatively neutral position. The strategy makes a profit from…
Limit order books (LOBs) match buyers and sellers in more than half of the world's financial markets. This survey highlights the insights that have emerged from the wealth of empirical and theoretical studies of LOBs. We examine the…
Market participants regularly send bid and ask quotes to exchange-operated limit order books. This creates an optimization challenge where their potential profit is determined by their quoted price and how often their orders are…
We introduce and study a simple model of a limit order-driven market. Traders in this model can either trade at the market price or place a limit order, i.e. an instruction to buy (sell) a certain amount of the stock if its price falls…
We propose a price impact model where changes in prices are purely driven by the order flow in the market. The stochastic price impact of market orders and the arrival rates of limit and market orders are functions of the market liquidity…