Related papers: A mathematical framework for modelling order book …
In this paper we consider classes of models that have been recently developed for quantitative finance that involve modelling a highly complex multivariate, multi-attribute stochastic process known as the Limit Order Book (LOB). The LOB is…
We use standard physics techniques to model trading and price formation in a market under the assumption that order arrival and cancellations are Poisson random processes. This model makes testable predictions for the most basic properties…
One popular approach to model the limit order books dynamics of the best bid and ask at level-1 is to use the reduced-form diffusion approximations. It is well known that the biggest contributing factor to the price movement is the…
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 introduce and study a simple model of a limit order-driven market. Traders in this model can either trade at the market price or place a limit order, i.e. an instruction to buy (sell) a certain amount of the stock if its price falls…
We examine the dynamics of the bid and ask queues of a limit order book and their relationship with the intensity of trade arrivals. In particular, we study the probability of price movements and trade arrivals as a function of the quote…
Equity auctions display several distinctive characteristics in contrast to continuous trading. As the auction time approaches, the rate of events accelerates causing a substantial liquidity buildup around the indicative price. This, in…
This paper is concerned with the determination of pricing strategies for a firm that in each period of a finite horizon receives replenishment quantities of a single product which it sells in two markets, e.g., a long-distance market and an…
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…
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 propose a microstructural modeling framework for studying optimal market making policies in a FIFO (first in first out) limit order book (LOB). In this context, the limit orders, market orders, and cancel orders arrivals in the LOB are…
Statistical properties of an order book and the effect they have on price dynamics were studied using the high-frequency NASDAQ Level II data. It was observed that the size distribution of marketable orders (transaction sizes) has power law…
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…
The literature on master production scheduling for product mix problems under the Theory of Constraints (TOC) was considered by many previous studies. Most studies assume a static resources availability. In this study, the raw materials…
Market making refers to a form of trading in financial markets characterized by passive orders which add liquidity to limit order books. Market makers are important for the proper functioning of financial markets worldwide. Given the…
Understanding the emergence of universal features such as the stylized facts in markets is a long-standing challenge that has drawn much attention from economists and physicists. Most existing models, such as stochastic volatility models,…
We introduce a new model in order to describe the fluctuation of tick-by-tick financial time series. Our model, based on marked point process, allows us to incorporate in a unique process the duration of the transaction and the…
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…
Most recent advances in machine learning and analytics for process control pose the question of how to naturally integrate new data-driven methods with classical process models and control. We propose a process modeling framework enabling…
We consider assortment and inventory planning problems with dynamic stockout-based substitution effects, and without replenishment, in two different settings: (1) Customers can see all available products when they arrive, a typical scenario…