Related papers: On bid and ask side-specific tick sizes
We present a novel approach to describing the microstructure of high frequency trading using two key elements. First we introduce a new notion of informed trader which we starkly contrast to current informed trader models. We describe the…
Volume imbalance in a limit order book is often considered as a reliable indicator for predicting future price moves. In this work, we seek to analyse the nuances of the relationship between prices and volume imbalance. To this end, we…
We develop a theory of bid and ask price dynamics where the two prices form due to interaction of buy and sell orders. In this model the two prices are represented by eigenvalues of a 2x2 price operator corresponding to "bid" and "ask"…
The author seeks to develop a model to alter the bid-offer spread, currently quoted by market makers, that varies with the market and trading conditions. The dynamic nature of financial markets and trading, as with the rest of social…
Sequential auctions for identical items with unit-demand, private-value buyers are common and often occur periodically without end, as new bidders replace departing ones. We model bidder uncertainty by introducing a probability that a…
This paper investigates the scaling dependencies between measures of "activity" and of "size" for companies included in the FTSE 100. The "size" of companies is measured by the total market capitalization. The "activity" is measured with…
This paper shows that jumps in financial asset prices are often erroneously identified and are, in fact, rare events accounting for a very small proportion of the total price variation. We apply new econometric techniques to a comprehensive…
Most modern financial markets use a continuous double auction mechanism to store and match orders and facilitate trading. In this paper we develop a microscopic dynamical statistical model for the continuous double auction under the…
By studying all the trades and best bids/asks of ultra high frequency snapshots recorded from the order books of a basket of 10 futures assets, we bring qualitative empirical evidence that the impact of a single trade depends on the…
In this study we examine the evolution of price, volume, and the bid-ask spread after extreme 15 minute intraday price changes on the NYSE and the NASDAQ. We find that due to strong behavioral trading there is an overreaction. Furthermore…
In order to investigate the origin of large price fluctuations, we analyze stock price changes of ten frequently traded NASDAQ stocks in the year 2002. Though the influence of the trading frequency on the aggregate return in a certain time…
The statistical properties of the bid-ask spread of a frequently traded Chinese stock listed on the Shenzhen Stock Exchange are investigated using the limit-order book data. Three different definitions of spread are considered based on the…
Given two time series, A and B, sampled asynchronously at different times {t_A_i} and {t_B_j}, termed "ticks", how can one best estimate the correlation coefficient \rho between changes in A and B? We derive a natural, minimum-variance…
We study the most famous example of a large financial market: the Arbitrage Pricing Model, where investors can trade in a one-period setting with countably many assets admitting a factor structure. We consider the problem of maximising…
This work's purpose is to understand the dynamics of limit order books in order-driven markets. We try to illustrate a dynamical trading mechanism attached to the microstructure of limit order markets. We capture the iterative nature of…
A micro-scale model is proposed for the evolution of the limit order book. Within this model, the flows of orders (claims) are described by doubly stochastic Poisson processes taking account of the stochastic character of intensities of bid…
Financial markets show a number of non-stationarities, ranging from volatility fluctuations over ever changing technical and regulatory market conditions to seasonalities. On the other hand, financial markets show various stylized facts…
We present results of numerical analysis of several simple models for the microstructure of a double auction market without intermediaries which were introduced in cond-mat/9808240. We perform computer simulations of the minimal model in…
Increased day-trading activity and the subsequent jump in intraday volatility and trading volume fluctuations has raised considerable interest in models for financial market microstructure. We investigate the random transitions between two…
By applying the multifractal detrended fluctuation analysis to the high-frequency tick-by-tick data from Deutsche B\"orse both in the price and in the time domains, we investigate multifractal properties of the time series of logarithmic…