Related papers: Conservation Laws in a Limit Order Book
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 define a stochastic model of a two-sided limit order book in terms of its key quantities \textit{best bid [ask] price} and the \textit{standing buy [sell] volume density}. For a simple scaling of the discreteness parameters, that keeps…
Aggregation processes with an arbitrary number of conserved quantities are investigated. On the mean-field level, an exact solution for the size distribution is obtained. The asymptotic form of this solution exhibits nontrivial ``double''…
We build an agent-based model for the order book with three types of market participants: informed trader, noise trader and competitive market makers. Using a Glosten-Milgrom like approach, we are able to deduce the whole limit order book…
We consider optimal execution strategies for block market orders placed in a limit order book (LOB). We build on the resilience model proposed by Obizhaeva and Wang (2005) but allow for a general shape of the LOB defined via a given density…
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…
Conservation laws are an inherent feature in many systems modeling real world phenomena, in particular, those modeling biological and chemical systems. If the form of the underlying dynamical system is known, linear algebra and algebraic…
Latent order book models have allowed for significant progress in our understanding of price formation in financial markets. In particular they are able to reproduce a number of stylized facts, such as the square-root impact law. An…
In this work, we present a continuous-time large-population game for modeling market microstructure betweentwo consecutive trades. The proposed modeling framework is inspired by our previous work [23]. In this framework, the Limit Order…
We establish a first and second-order approximation for an infinite dimensional limit order book model (LOB) in a single (''critical'') scaling regime where market and limit orders arrive at a common time scale. With our choice of scaling…
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…
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…
This paper studies a limit order book (LOB) model, in which the order dynamics depend on both, the current best available prices and the current volume density functions. For the joint dynamics of the best bid price, the best ask price, and…
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…
A novel high-frequency market-making approach in discrete time is proposed that admits closed-form solutions. By taking advantage of demand functions that are linear in the quoted bid and ask spreads with random coefficients, we model the…
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…
We consider a framework for solving optimal liquidation problems in limit order books. In particular, order arrivals are modeled as a point process whose intensity depends on the liquidation price. We set up a stochastic control problem in…
In this paper we derive a second order approximation for an infinite dimensional limit order book model, in which the dynamics of the incoming order flow is allowed to depend on the current market price as well as on a volume indicator…
In this paper we consider classes of models that have been recently developed for quantitative finance that involve modelling a highly complex multivariate, multi-attribute stochastic process known as the Limit Order Book (LOB). The LOB is…
We model the behavior of three agent classes acting dynamically in a limit order book of a financial asset. Namely, we consider market makers (MM), high-frequency trading (HFT) firms, and institutional brokers (IB). Given a prior dynamic of…