Related papers: A mathematical framework for modelling order book …
We define a stochastic model of a two-sided limit order book in terms of its key quantities \textit{best bid [ask] price} and the \textit{standing buy [sell] volume density}. For a simple scaling of the discreteness parameters, that keeps…
Through the analysis of a dataset of ultra high frequency order book updates, we introduce a model which accommodates the empirical properties of the full order book together with the stylized facts of lower frequency financial data. To do…
This paper proposes a parametric approach for stochastic modeling of limit order markets. The models are obtained by augmenting classical perfectly liquid market models by few additional risk factors that describe liquidity properties of…
In this work, we present a continuous-time large-population game for modeling market microstructure betweentwo consecutive trades. The proposed modeling framework is inspired by our previous work [23]. In this framework, the Limit Order…
In this paper we develop a model of an order-driven market where traders set bids and asks and post market or limit orders according to exogenously fixed rules. Agents are assumed to have three components to the expectation of future asset…
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…
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…
We introduce a Cox-type model for relative intensities of orders flows in a limit order book. The model assumes that all intensities share a common baseline intensity, which may for example represent the global market activity. Parameters…
In the present work we introduce a novel multi-agent model with the aim to reproduce the dynamics of a double auction market at microscopic time scale through a faithful simulation of the matching mechanics in the limit order book. The…
In this paper we develop a new form of agent-based model for limit order books based on heterogeneous trading agents, whose motivations are liquidity driven. These agents are abstractions of real market participants, expressed in 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…
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…
We consider a broker who has to place a large order which consumes a sizable part of average daily trading volume. The broker's aim is thus to minimize execution costs he incurs from the adverse impact of his trades on market prices. By…
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…
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 present a simple order book mechanism that regulates an artificial financial market with self-organized criticality dynamics and fat tails of returns distribution. The model shows the role played by individual imitation in determining…
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…
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…
In this study, we introduce a physical model inspired by statistical physics for predicting price volatility and expected returns by leveraging Level 3 order book data. By drawing parallels between orders in the limit order book and…
We propose a parametric model for the simulation of limit order books. We assume that limit orders, market orders and cancellations are submitted according to point processes with state-dependent intensities. We propose new functional forms…