A Stochastic Model for Order Book Dynamics

Rama Cont, Sasha Stoikov, Rishi Talreja · 2010 · Operations Research

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Queueing model of the LOB with Poisson arrivals and cancellations. Computes probabilities like 'the mid moves up next' or 'my order fills before the mid moves'.

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At a glance

Level: Advanced: Stochastic control, point processes, heavy econometrics or deep learning
Horizon: HFT
Data needed: L2 depth (every update) Set what data you have
Themes: Order book models
Assets: Equities
Market: Global

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Modelling and simulating the order book

← Statistical properties of stock order books: empirical results and modelsPrice Dynamics in a Markovian Limit Order Market →

Cite

@article{cont2010stochastic,
  author = {Cont, Rama and Stoikov, Sasha and Talreja, Rishi},
  title = {{A Stochastic Model for Order Book Dynamics}},
  journal = {Operations Research},
  year = {2010},
  doi = {10.1287/opre.1090.0780}
}

Cont, R., Stoikov, S., & Talreja, R. (2010). A Stochastic Model for Order Book Dynamics. Operations Research. https://doi.org/10.1287/opre.1090.0780