Related papers: Bridging the Reality Gap in Limit Order Book Simul…
Financial markets can be described on several time scales. We use data from the limit order book of the London Stock Exchange (LSE) to compare how the fluctuation dominated microstructure crosses over to a more systematic global behavior.
In financial markets, the order flow, defined as the process assuming value one for buy market orders and minus one for sell market orders, displays a very slowly decaying autocorrelation function. Since orders impact prices, reconciling…
This paper presents a novel model for simulating and analyzing sparse limit order books (LOBs), with a specific application to the European intraday electricity market. In illiquid markets, characterized by significant gaps between order…
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…
I introduce an agent-based model of a Perpetual Futures market with heterogeneous agents trading via a central limit order book. Perpetual Futures (henceforth Perps) are financial derivatives introduced by the economist Robert Shiller,…
We propose a price impact model where changes in prices are purely driven by the order flow in the market. The stochastic price impact of market orders and the arrival rates of limit and market orders are functions of the market liquidity…
We develop exact simulation (also known as perfect sampling) algorithms for a family of assemble-to-order systems. Due to the finite capacity, and coupling in demands and replenishments, known solving techniques are inefficient for larger…
We propose a framework to study optimal trading policies in a one-tick pro-rata limit order book, as typically arises in short-term interest rate futures contracts. The high-frequency trader has the choice to trade via market orders or…
We consider optimal execution strategies for block market orders placed in a limit order book (LOB). We build on the resilience model proposed by Obizhaeva and Wang (2005) but allow for a general shape of the LOB defined via a given density…
Trading algorithms that execute large orders are susceptible to exploitation by order anticipation strategies. This paper studies the influence of order anticipation strategies in a multi-investor model of optimal execution under transient…
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…
This paper uses the development of multi-agent market models to present a unified approach to the joint questions of how financial market movements may be simulated, predicted, and hedged against. We examine the effect of different market…
We introduce a new Self-Organized Criticality (SOC) model for simulating price evolution in an artificial financial market, based on a multilayer network of traders. The model also implements, in a quite realistic way with respect to…
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 use random walks to simulate the fluid limit of two coupled diffusive limit order books to model correlation emergence. The model implements the arrival, cancellation and diffusion of orders coupled by a pairs trader profiting from the…
Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problem with both static and dynamic components. They…
We study the analytical properties of a one-side order book model in which the flows of limit and market orders are Poisson processes and the distribution of lifetimes of cancelled orders is exponential. Although simplistic, the model…
High-frequency market making is a liquidity-providing trading strategy that simultaneously generates many bids and asks for a security at ultra-low latency while maintaining a relatively neutral position. The strategy makes a profit from…
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…
One of the key decisions in execution strategies is the choice between a passive (liquidity providing) or an aggressive (liquidity taking) order to execute a trade in a limit order book (LOB). Essential to this choice is the fill…