Related papers: On binomial order avalanches
Equity auctions display several distinctive characteristics in contrast to continuous trading. As the auction time approaches, the rate of events accelerates causing a substantial liquidity buildup around the indicative price. This, 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…
We study the optimal order placement strategy with the presence of a liquidity cost. In this problem, a stock trader wishes to clear her large inventory by a predetermined time horizon $T$. A trader uses both limit and market orders, and a…
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…
This paper considers a Markovian model of a limit order book where time-dependent rates are allowed. With the objective of understanding the mechanisms through which a microscopic model of an orderbook can converge to more general diffusion…
We analyze an optimal trade execution problem in a financial market with stochastic liquidity. To this end we set up a limit order book model in which both order book depth and resilience evolve randomly in time. Trading is allowed in both…
Conventional models of matching markets assume that monetary transfers can clear markets by compensating for utility differentials. However, empirical patterns show that such transfers often fail to close structural preference gaps. This…
This study explores the prediction of high-frequency price changes using deep learning models. Although state-of-the-art methods perform well, their complexity impedes the understanding of successful predictions. We found that an…
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…
We study the dynamics of the limit order book of liquid stocks after experiencing large intra-day price changes. In the data we find large variations in several microscopical measures, e.g., the volatility the bid-ask spread, the bid-ask…
We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical…
We study the price impact of order book events - limit orders, market orders and cancelations - using the NYSE TAQ data for 50 U.S. stocks. We show that, over short time intervals, price changes are mainly driven by the order flow…
We study the analytical properties of a one-side order book model in which the flows of limit and market orders are Poisson processes and the distribution of lifetimes of cancelled orders is exponential. Although simplistic, the model…
While the long-ranged correlation of market orders and their impact on prices has been relatively well studied in the literature, the corresponding studies of limit orders and cancellations are scarce. We provide here an empirical study of…
We introduce a model for limit order book of a certain security with two main features: First, both the limit orders and market orders for the given asset are allowed to appear and interact with each other. Second, the high frequency…
A limit order book provides information on available limit order prices and their volumes. Based on these quantities, we give an empirical result on the relationship between the bid-ask liquidity balance and trade sign and we show that…
I present an overview of some recent advancements on the empirical analysis and theoretical modeling of the process of price formation in financial markets as the result of the arrival of orders in a limit order book exchange. After…
We develop a cross-border market model for two countries based on a continuous trading mechanism, in which the transmission capacities that enable transactions between market participants from different countries are limited. Our market…
Optimal control models for limit order trading often assume that the underlying asset price is a Brownian motion since they deal with relatively short time scales. The resulting optimal bid and ask limit order prices tend to track 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.…