Related papers: Order flow and price formation
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…
In this paper I empirically investigate prediction markets for binary options. Advocates of prediction markets have suggested that asset prices are consistent estimators of the "true" probability of a state of the world being realized. I…
We analyze a tractable model of a limit order book on short time scales, where the dynamics are driven by stochastic fluctuations between supply and demand. We establish the existence of a limiting distribution for the highest bid, and for…
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…
Limit order books (LOBs) match buyers and sellers in more than half of the world's financial markets. This survey highlights the insights that have emerged from the wealth of empirical and theoretical studies of LOBs. We examine the…
We propose a new model for the level I of a Limit Order Book (LOB), which incorporates the information about the standing orders at the opposite side of the book after each price change and the arrivals of new orders within the spread. Our…
The latent order book of \cite{donier2015fully} is one of the most promising agent-based models for market impact. This work extends the minimal model by allowing agents to exhibit mean-reversion, a commonly observed pattern in real…
Using Trades and Quotes data from the Paris stock market, we show that the random walk nature of traded prices results from a very delicate interplay between two opposite tendencies: long-range correlated market orders that lead to…
We present a measurement of price impact in order-driven markets that does not require averages across executions or scenarios. Given the order book data associated with one single execution of a sell metaorder, we measure its contribution…
Financial order flow exhibits a remarkable level of persistence, wherein buy (sell) trades are often followed by subsequent buy (sell) trades over extended periods. This persistence can be attributed to the division and gradual execution of…
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…
Financial markets populated by human traders often exhibit "market impact", where the traders' quote-prices move in the direction of anticipated change, before any transaction has taken place, as an immediate reaction to the arrival of a…
We analyze a proprietary dataset of trades by a single asset manager, comparing their price impact with that of the trades of the rest of the market. In the context of a linear propagator model we find no significant difference between the…
This study examines the impact of different computing implementations of clearing mechanisms on multi-asset price dynamics within an artificial stock market framework. We show that sequential processing of order books introduces a…
In this paper we derive a second order approximation for an infinite dimensional limit order book model, in which the dynamics of the incoming order flow is allowed to depend on the current market price as well as on a volume indicator…
Motivated by the desire to bridge the gap between the microscopic description of price formation (agent-based modeling) and the stochastic differential equations approach used classically to describe price evolution at macroscopic time…
Recent technological developments have changed the fundamental ways stock markets function, bringing regulatory instances to assess the benefits of these developments. In parallel, the ongoing machine learning revolution and its multiple…
To execute a trade, participants in electronic equity markets may choose to submit limit orders or market orders across various exchanges where a stock is traded. This decision is influenced by the characteristics of the order flow and…
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 the present work we develop a formalism to tackle the problem of optimal execution when trading market securities. More precisely, we introduce a utility function that balances market impact and timing risk, with this last being modelled…