Price Dynamics in a Markovian Limit Order Market

Rama Cont, Adrien de Larrard · 2013 · SIAM Journal on Financial Mathematics

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Models only the queue sizes at the best bid and ask, giving closed-form probabilities of the next price move from queue imbalance.

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At a glance

Level: Advanced: Stochastic control, point processes, heavy econometrics or deep learning
Horizon: HFT
Data needed: L1 quotes Set what data you have
Themes: Order book models Order-flow alpha
Assets: Equities
Market: Global

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Modelling and simulating the order book

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Cite

@article{cont2013price,
  author = {Cont, Rama and de Larrard, Adrien},
  title = {{Price Dynamics in a Markovian Limit Order Market}},
  journal = {SIAM Journal on Financial Mathematics},
  year = {2013},
  doi = {10.1137/110856605}
}

Cont, R., & de Larrard, A. (2013). Price Dynamics in a Markovian Limit Order Market. SIAM Journal on Financial Mathematics. https://doi.org/10.1137/110856605