Related papers: Informed trading, limit order book and implementat…
This paper proposes a parametric approach for stochastic modeling of limit order markets. The models are obtained by augmenting classical perfectly liquid market models by few additional risk factors that describe liquidity properties of…
We study the problem of the execution of a moderate size order in an illiquid market within the framework of a solvable Markovian model. We suppose that in order to avoid impact costs, a trader decides to execute her order through a unique…
We consider a stochastic lost-sales inventory control system with a lead time $L$ over a planning horizon $T$. Supply is uncertain, and is a function of the order quantity (due to random yield/capacity, etc). We aim to minimize the…
We study partial information Nash equilibrium between a broker and an informed trader. In this setting, the informed trader, who possesses knowledge of a trading signal, trades multiple assets with the broker in a dealer market.…
The article is an empirical study of market impact through order book events. It describes a mechanism of extracting an average participation rate and a market impact of small orders which represent individual slices of large metaorders.…
We empirically study the trading activity in the electronic on-book segment and in the dealership off-book segment of the London Stock Exchange, investigating separately the trading of active market members and of other market participants…
A quasi-centralized limit order book (QCLOB) is a limit order book (LOB) in which financial institutions can only access the trading opportunities offered by counterparties with whom they possess sufficient bilateral credit. We perform an…
This paper characterizes informational outcomes in a model of dynamic signaling with vanishing commitment power. It shows that contrary to popular belief, informative equilibria with payoff-relevant signaling can exist without requiring…
We propose a framework to study optimal trading policies in a one-tick pro-rata limit order book, as typically arises in short-term interest rate futures contracts. The high-frequency trader has the choice to trade via market orders or…
This article provides a simple explanation of the asymptotic concavity of the price impact of a meta-order via the microstructural properties of the market. This explanation is made more precise by a model in which the local relationship…
In this paper, we present a multi-period trading model by assuming that traders face not only asymmetric information but also heterogenous prior beliefs, under the requirement that the insider publicly disclose his stock trades after the…
In this paper, we introduce a parametrized family of prices derived from the Maximum Entropy Principle. The price is obtained from the distribution that minimizes bias, given the bid and ask volume imbalance at the top of the order book.…
We use random walks to simulate the fluid limit of two coupled diffusive limit order books to model correlation emergence. The model implements the arrival, cancellation and diffusion of orders coupled by a pairs trader profiting from the…
We propose a microstructural modeling framework for studying optimal market making policies in a FIFO (first in first out) limit order book (LOB). In this context, the limit orders, market orders, and cancel orders arrivals in the LOB are…
Despite the fact that an intraday market price distribution is not normal, the random walk model of price behaviour is as important for the understanding of basic principles of the market as the pendulum model is a starting point of many…
The latent order book of \cite{donier2015fully} is one of the most promising agent-based models for market impact. This work extends the minimal model by allowing agents to exhibit mean-reversion, a commonly observed pattern in real…
We investigate the probability distribution of order imbalance calculated from the order flow data of 43 Chinese stocks traded on the Shenzhen Stock Exchange. Two definitions of order imbalance are considered based on the order number and…
This paper focuses on some simple models of limit order book dynamics which simulate market trading mechanisms. We start with a discrete time/space Markov process and then perform a re-scaling procedure leading to a deterministic dynamical…
We consider an optimal trading problem under a market impact model with endogenous market resistance generated by a sophisticated trader who (partially) detects metaorders and trades against them to exploit price overreactions induced by…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…