Related papers: Analyzing and modelling 1+1d markets
We briefly review data analysis of the Island order book, part of NASDAQ, which suggests a framework to which all limit order markets should comply. Using a simple exclusion particle model, we argue that short-time price over-diffusion in…
Buying and selling stocks causes price changes, which are described by the price impact function. To explain the shape of this function, we study the Island ECN orderbook. In addition to transaction data, the orderbook contains information…
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,…
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…
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 introduce a prototype model in an attempt to capture some aspects of market dynamics simulating a trading mechanism. The model description starts with a discrete-space, continuous-time Markov process describing arrival and movement of…
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…
This paper focuses on some simple models of limit order book dynamics which simulate market trading mechanisms. We start with a discrete time/space Markov process and then perform a re-scaling procedure leading to a deterministic dynamical…
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…
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…
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…
We propose a class of stochastic models for a dynamics of limit order book with different type of liquidities. Within this class of models we study the one where a spread decreases uniformly, belonging to the class of processes known as a…
We generalise the description of the dynamics of the order book of financial markets in terms of a Brownian particle embedded in a fluid of incoming, exiting and annihilating particles by presenting a model of the velocity on each side (buy…
We study the dynamics of the limit order book of liquid stocks after experiencing large intra-day price changes. In the data we find large variations in several microscopical measures, e.g., the volatility the bid-ask spread, the bid-ask…
This work's purpose is to understand the dynamics of limit order books in order-driven markets. We try to illustrate a dynamical trading mechanism attached to the microstructure of limit order markets. We capture the iterative nature of…
We propose a simple stochastic model for the dynamics of a limit order book, extending the recent work of Cont and de Larrard (2013), where the price dynamics are endogenous, resulting from market transactions. We also show that the…
In this paper we introduce a completely continuous and time-variate model of the evolution of market limit orders based on the existence, uniqueness, and regularity of the solutions to a type of stochastic partial differential equations…
We take inspiration from statistical physics to develop a novel conceptual framework for the analysis of financial markets. We model the order book dynamics as a motion of particles and define the momentum measure of the system as a way to…
Far-from-equilibrium models of interacting particles in one dimension are used as a basis for modelling the stock-market fluctuations. Particle types and their positions are interpreted as buy and sell orders placed on a price axis in the…
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…