Related papers: Limit Order Book Dynamics in Matching Markets: Mic…
In order-driven markets, limit-order book (LOB) resiliency is an important microscopic indicator of market quality when the order book is hit by a liquidity shock and plays an essential role in the design of optimal submission strategies of…
We propose a series of simple models for the microstructure of a double auction market without intermediaries. We specialize to those markets, such interdealer broker markets, which are dominated by professional traders, who trade mainly…
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…
Pricing decisions are often made when market information is still poor. In turn, existing theoretical models often reason about the response of optimal prices to changing market characteristics without exploiting all available information…
We show that the statistics of spreads in real order books is characterized by an intrinsic asymmetry due to discreteness effects for even or odd values of the spread. An analysis of data from the NYSE order book points out that traders'…
A great deal of academic and theoretical work has been dedicated to optimal liquidation of large orders these last twenty years. The optimal split of an order through time (`optimal trade scheduling') and space (`smart order routing') is of…
In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…
We present a simple dynamic equilibrium model for an online exchange where both buyers and sellers arrive according to a exogenously defined stochastic process. The structure of this exchange is motivated by the limit order book mechanism…
R. Cont and A. de Larrard (SIAM J. Finan. Math, 2013) introduced a tractable stochastic model for the dynamics of a limit order book, computing various quantities of interest such as the probability of a price increase or the diffusion…
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…
We study optimal liquidation strategies under partial information for a single asset within a finite time horizon. We propose a model tailored for high-frequency trading, capturing price formation driven solely by order flow through…
We present results of numerical analysis of several simple models for the microstructure of a double auction market without intermediaries which were introduced in cond-mat/9808240. We perform computer simulations of the minimal model in…
We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical…
In this paper we extend the series of our studies on the properties of an interacting particle model for market microstructure. In our earlier work we defined a Markov process on the majority opinion of the agents, obtained the transition…
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…
Strategy-proofness is a fundamental desideratum in mechanism design, ensuring truthful reporting and robust participation. Stability is another central requirement in matching markets, widely adopted in applications such as school choice…
We propose a static equilibrium model for limit order book where profit-maximizing investors receive an information signal regarding the liquidation value of the asset and execute via a competitive dealer with random initial inventory, who…
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…
Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…