Related papers: Jump diffusion approximation for the price dynamic…

We present a Markovian market model driven by a hidden Brownian efficient price. In particular, we extend the queue-reactive model, making its dynamics dependent on the efficient price. Our study focuses on two sub-models: a signal-driven…

In the domain of the so called Econophysics some attempts already have been made for applying the theory of Thermodynamics and Statistical Mechanics to economics and financial markets. In this paper a similar approach is made from a…

We examine the correlation of the limit price with the order book, when a limit order comes. We analyzed the Rebuild Order Book of Stock Exchange Electronic Trading Service, which is the centralized order book market of London Stock…

Convergence of stochastic processes with jumps to diffusion processes is investigated in the case when the limit process has discontinuous coefficients. An example is given in which the diffusion approximation of a queueing model yields a…

We approximate the price of the American put for jump diffusions by a sequence of functions, which are computed iteratively. This sequence converges to the price function uniformly and exponentially fast. Each element of the approximating…

When randomness in demand affects the sales of a product, retailers use dynamic pricing strategies to maximize their profits. In this article, we formulate the pricing problem as a continuous-time stochastic optimal control problem and find…

In this paper we present a novel approach to the determination of fat tails in financial data by studying the information contained in the limit order book. In an order-driven market buyers and sellers may submit limit orders, which are…

We study a double-ended queue where buyers and sellers arrive to conduct trades. When there is a pair of buyer and seller in the system, they immediately transact a trade and leave. Thus there cannot be non-zero number of buyers and sellers…

We present an agent behavior based microscopic model for diffusion price processes. As such we provide a model not only containing a convenient framework for describing socio-economic behavior, but also a sophisticated link to price…

With the proliferation of algorithmic high-frequency trading in financial markets, the Limit Order Book has generated increased research interest. Research is still at an early stage and there is much we do not understand about the dynamics…

We introduce a simple model of diffusive jump process where a fee is charged for each jump. The nonlinear cost function is such that slow jumps incur a flat fee, while for fast jumps the cost is proportional to the velocity of the jump. The…

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…

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…

Limit order book (LOB) is a dynamic, event-driven system that records real-time market demand and supply for a financial asset in a stream flow. Event stream prediction in LOB refers to forecasting both the timing and the type of events.…

We propose methods to infer jumps of a semi-martingale, which describes long-term price dynamics, based on discrete, noisy, high-frequency observations. Different to the classical model of additive, centered market microstructure noise, we…

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…

In this work we introduce two variants of multivariate Hawkes models with an explicit dependency on various queue sizes aimed at modeling the stochastic time evolution of a limit order book. The models we propose thus integrate the…

An agent-based model for financial markets has to incorporate two aspects: decision making and price formation. We introduce a simple decision model and consider its implications in two different pricing schemes. First, we study its…

We describe numerical simulations of the stochastic diffusion equation with a conserved charge. We focus on the dynamics in the vicinity of a critical point in the Ising universality class. The model we consider is expected to describe the…

Modeling the impact of the order flow on asset prices is of primary importance to understand the behavior of financial markets. Part I of this paper reported the remarkable improvements in the description of the price dynamics which can be…