Related papers: On binomial order avalanches
In this paper we demonstrate a striking regularity in the way people place limit orders in financial markets, using a data set consisting of roughly seven million orders from the London Stock Exchange. We define the relative limit price as…
This paper is concerned with the determination of pricing strategies for a firm that in each period of a finite horizon receives replenishment quantities of a single product which it sells in two markets, e.g., a long-distance market and an…
We introduce a new class of combinatorial markets in which agents have covering constraints over resources required and are interested in delay minimization. Our market model is applicable to several settings including scheduling, cloud…
In Part II of this paper, we concentrate our analysis on the price dynamical model with the moving average rules developed in Part I of this paper. By decomposing the excessive demand function, we reveal that it is the interplay between…
Building on similarities between earthquakes and extreme financial events, we use a self-organized criticality-generating model to study herding and avalanche dynamics in financial markets. We consider a community of interacting investors,…
Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problem with both static and dynamic components. They…
In this paper, we propose an equilibrium pricing model in a dynamic multi-period stochastic framework with uncertain income streams. In an incomplete market, there exist two traded risky assets (e.g. stock/commodity and weather derivative)…
An ability to postpone one's execution without penalty provides an important strategic advantage in high-frequency trading. To elucidate competition between traders one has to formulate to a quantitative theory of formation of the execution…
Using numerical simulations we examine colloids with a long-range Coulomb interaction confined in a two-dimensional trough potential undergoing dynamical compression. As the depth of the confining well is increased, the colloids move via…
We argue that contemporary stock market designs are, due to traders' inability to fully express their preferences over the execution times of their orders, prone to latency arbitrage. In turn, we propose a new order type which allows…
We develop a theory for the market impact of large trading orders, which we call metaorders because they are typically split into small pieces and executed incrementally. Market impact is empirically observed to be a concave function of…
Classical optimal auction theory assumes that bids reach the seller directly. We study how this picture changes when a revenue-maximizing intermediary controls access to the seller's auction. Motivated by blockchain auctions, online…
We study the tails of closing auction return distributions for a sample of liquid European stocks. We use the stochastic call auction model of Derksen et al. (2020a), to derive a relation between tail exponents of limit order placement…
How and why stock prices move is a centuries-old question still not answered conclusively. More recently, attention shifted to higher frequencies, where trades are processed piecewise across different timescales. Here we reveal that price…
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…
The time proximity of high-frequency trades can contain a salient signal. In this paper, we propose a method to classify every trade, based on its proximity with other trades in the market within a short period of time, into five types. By…
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…
The statistics of burst avalanche sizes $n$ during failure processes in a fiber bundle follows a power law, $D(n)\sim n^{-\xi}$, for large avalanches. The exponent $\xi$ depends upon how the avalanches are provoked. While it is known that…
I discuss the size distribution ${\cal N}(S)$ of avalanches occurring at the yielding transition of mean field (i.e., Hebraud-Lequeux) models of amorphous solids. The size distribution follows a power law dependence of the form: ${\cal…
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…