Related papers: Order flow and price formation

We empirically study the market impact of trading orders. We are specifically interested in large trading orders that are executed incrementally, which we call hidden orders. These are reconstructed based on information about market member…

We provide an explicit characterization of the optimal market making strategy in a discrete-time Limit Order Book (LOB). In our model, the number of filled orders during each period depends linearly on the distance between the fundamental…

This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…

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…

Market making is one of the most important aspects of algorithmic trading, and it has been studied quite extensively from a theoretical point of view. The practical implementation of so-called "optimal strategies" however suffers from the…

We introduce a simple framework in which market participants update their prior about an efficient price with a model-based learning process. We show that exponential intensities for the arrival of aggressive orders arise naturally in this…

In financial markets, liquidity is not constant over time but exhibits strong seasonal patterns. In this article we consider a limit order book model that allows for time-dependent, deterministic depth and resilience of the book and…

We propose a microstructural model for the order flow in financial markets that distinguishes between {\it core orders} and {\it reaction flow}, both modeled as Hawkes processes. This model has a natural scaling limit that reconciles a…

We identify and analyze statistical regularities and irregularities in the recent order flow of different NASDAQ stocks, focusing on the positions where orders are placed in the orderbook. This includes limit orders being placed outside of…

Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…

In this paper we introduce a completely continuous and time-variate model of the evolution of market limit orders based on the existence, uniqueness, and regularity of the solutions to a type of stochastic partial differential equations…

We investigate present some new statistical properties of order books. We analyse data from the Nasdaq and investigate (a) the statistics of incoming limit order prices, (b) the shape of the average order book, and (c) the typical life time…

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…

The available liquidity at any time in financial markets falls largely short of the typical size of the orders that institutional investors would trade. In order to reduce the impact on prices due to the execution of large orders, traders…

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…

Many early order flow auction designs handle the payment for orders when they execute on the chain rather than when they are won in the auction. Payments in these auctions only take place when the orders are executed, creating a free option…

At the ultra high frequency level, the notion of price of an asset is very ambiguous. Indeed, many different prices can be defined (last traded price, best bid price, mid price,...). Thus, in practice, market participants face the problem…

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…

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 develop a behavioral model for liquidity and volatility based on empirical regularities in trading order flow in the London Stock Exchange. This can be viewed as a very simple agent based model in which all components of the model are…