Related papers: A mathematical framework for modelling order book …
We consider a simple model for the evolution of a limit order book in which limit orders of unit size arrive according to independent Poisson processes. The frequencies of buy limit orders below a given price level, respectively sell limit…
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…
We present a reproducible research framework for market microstructure combining a deterministic C++ limit order book (LOB) simulator with stochastic order flow generated by multivariate marked Hawkes processes. The paper derives full…
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…
Order submission and cancellation are two constituent actions of stock trading behaviors in order-driven markets. Order submission dynamics has been extensively studied for different markets, while order cancellation dynamics is less…
We use a recent, high-quality data set from Nasdaq to perform an empirical analysis of order flow in a limit order book (LOB) before and after the arrival of a market order. For each of the stocks that we study, we identify a sequence of…
We describe a bottom-up framework, based on the identification of appropriate order parameters and determination of phase diagrams, for understanding progressively refined agent-based models and simulations of financial markets. We…
Latent order book models have allowed for significant progress in our understanding of price formation in financial markets. In particular they are able to reproduce a number of stylized facts, such as the square-root impact law. An…
We propose a model for price formation in financial markets based on clearing of a standard call auction with random orders, and verify its validity for prediction of the daily closing price distribution statistically. The model considers…
Commonly used limit order book attributes are empirically considered based on NASDAQ ITCH data. It is shown that some of them have the properties drastically different from the ones assumed in many market dynamics study. Because of this…
We propose a microscopic model to describe the dynamics of the fundamental events in the limit order book (LOB): order arrivals and cancellations. It is based on an operator algebra for individual orders and describes their effect on the…
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…
This paper derives a diffusion approximation for a sequence of discrete-time one-sided limit order book models with non-linear state dependent order arrival and cancellation dynamics. The discrete time sequences are specified in terms of an…
We propose a framework for studying optimal market making policies in a limit order book (LOB). The bid-ask spread of the LOB is modelled by a Markov chain with finite values, multiple of the tick size, and subordinated by the Poisson…
We establish a first and second-order approximation for an infinite dimensional limit order book model (LOB) in a single (''critical'') scaling regime where market and limit orders arrive at a common time scale. With our choice of scaling…
This paper proposes a two-step framework for techno-economic analysis of a demand-side flexibility service in distribution networks. Step one applies optimization-based modelling to propose a generic problem formulation which determines the…
In this research, we have empirically investigated the key drivers affecting liquidity in equity markets. We illustrated how theoretical models, such as Kyle's model, of agents' interplay in the financial markets, are aligned with the…
Conventional models of matching markets assume that monetary transfers can clear markets by compensating for utility differentials. However, empirical patterns show that such transfers often fail to close structural preference gaps. This…
While the long-ranged correlation of market orders and their impact on prices has been relatively well studied in the literature, the corresponding studies of limit orders and cancellations are scarce. We provide here an empirical study of…
The objective of this paper is to initiate a qualitative analysis of dynamic flow in traffic networks by using the competitive equilibrium model of multiple market systems. A network is modeled as a dynamic graph where routes (edges) are…