Related papers: Simple model of a limit order-driven market

Consider a trade market with one seller and multiple buyers. The seller aims to sell an indivisible item and maximize their revenue. This paper focuses on a simple and popular mechanism--the fixed-price mechanism. Unlike the standard…

This paper measures and compares the tail risks of limit and market orders using Extreme Value Theory. The analysis examines realised tail outcomes using the Dealing 2000-2 electronic broking system based on completed transactions rather…

We propose a model for a market which structure is of the tree form. Each branch of the tree is composed by identical firms, its root (the branch of the first level) is formed by the firms producing raw material, and the branches of the…

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…

Employing probabilistic techniques we compute best possible upper and lower bounds on the price of an option on one or two assets with continuous piecewise linear payoff function based on prices of simple call options of possibly distinct…

This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…

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 study a discrete-time financial market with a single constrained trader, competitive market makers, and noise traders. Within the class of linear equilibria, the equilibrium structure is shown to be uniquely determined by two state…

This article provides a simple explanation of the asymptotic concavity of the price impact of a meta-order via the microstructural properties of the market. This explanation is made more precise by a model in which the local relationship…

In the present work we introduce a novel multi-agent model with the aim to reproduce the dynamics of a double auction market at microscopic time scale through a faithful simulation of the matching mechanics in the limit order book. The…

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…

The present paper introduces a majority orienting model in which the dealers' behavior changes based on the influence of the price to show the oscillation of stock price in the stock market. We show the oscillation of the price for the…

We consider a dynamic market model of liquidity where unmatched buy and sell limit orders are stored in order books. The resulting net demand surface constitutes the sole input to the model. We prove that generically there is no arbitrage…

A simple Ising spin model which can describe the mechanism of price formation in financial markets is proposed. In contrast to other agent-based models, the influence does not flow inward from the surrounding neighbors to the center site,…

In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…

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…

This paper introduces a discrete limit order book model where new orders are placed with a fixed displacement from the mid-price. Further, the trade event occurs whenever the mid-price hits the price level on which there is some volume.…

In this paper, we introduce a novel reinforcement learning framework for optimal trade execution in a limit order book. We formulate the trade execution problem as a dynamic allocation task whose objective is the optimal placement of market…

We present a measurement of price impact in order-driven markets that does not require averages across executions or scenarios. Given the order book data associated with one single execution of a sell metaorder, we measure its contribution…

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…