From Glosten-Milgrom to the Whole Limit Order Book and Applications to Financial Regulation

Huang, Weibing; Rosenbaum, Mathieu; Saliba, Pamela

doi:10.2139/ssrn.3343779

Cited by 5 publications

(8 citation statements)

References 32 publications

(40 reference statements)

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“…We can see that for all these assets, the liquidity provision intensity is approximately a decreasing function of the queue size. This result reveals a quite common strategy used in practice: posting orders when the queue is small to seize priority (for further details about the priority value, see [17]). For all assets, the consumption intensity is an increasing function when the queue size is large.…”

Section: Computation Of the Intensities And The Stationary Measurementioning

confidence: 81%

“…After that, we estimate the new market intensities in a situation where we suppose that he withdraws from the exchange by subtracting the agent intensity from the market one, see Corollary 1. We finally compute the new market volatility estimators σ 2,G and σ 2,M k corresponding to this new scenario using Equation (17) and Remark 17 again.…”

Section: Numerical Experimentsmentioning

confidence: 99%

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From asymptotic properties of general point processes to the ranking of financial agents

Mounjid,

Rosenbaum,

Saliba

2019

Preprint

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We propose a general non-linear order book model that is built from the individual behaviours of the agents. Our framework encompasses Markovian and Hawkes based models. Under mild assumptions, we prove original results on the ergodicity and diffusivity of such system. Then we provide closed form formulas for various quantities of interest: stationary distribution of the best bid and ask quantities, spread, liquidity fluctuations and price volatility. These formulas are expressed in terms of individual order flows of market participants. Our approach enables us to establish a ranking methodology for the market makers with respect to the quality of their trading.

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Section: Computation Of the Intensities And The Stationary Measurementioning

confidence: 81%

Section: Numerical Experimentsmentioning

confidence: 99%

From asymptotic properties of general point processes to the ranking of financial agents

Mounjid,

Rosenbaum,

Saliba

2019

Preprint

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“…informed market maker cancels his order is 1 − f ). The introduction of the IMM and this parameter are the main differences and bring the main effects compared to the conclusions drawn by [HRS19] • One noise trader: he sends market orders without intelligence. Usually he is a liquidity taker trading for liquidity shocks unrelated to the actual dynamics.…”

Section: • Informed Market Makersmentioning

confidence: 99%

“…After the preamble on the nature of market participants, we build our agent-based model as in [HRS19;GM85]. Contrary to these papers we consider 4 types of market participants: an informed trader, a noise trader, informed market makers and noise market makers.…”

Section: Introductionmentioning

confidence: 99%

Limit Order Book (LOB) shape modeling in presence of heterogeneously informed market participants

Drame¹

2020

Preprint

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The modeling of the limit order book is directly related to the assumptions on the behavior of real market participants. This paper is twofold. We first present empirical findings that lay the ground for two improvements to these models.The first one is concerned with market participants by adding the additional dimension of informed market makers, whereas the second, and maybe more original one, addresses the race in the book between informed traders and informed market makers leading to different shapes of the order book. Namely we build an agent-based model for the order book with four types of market participants: informed trader, noise trader, informed market makers and noise market makers. We build our model based on the Glosten-Milgrom approach and the most recent Huang-Rosenbaum-Saliba approach. We introduce a parameter capturing the race between informed liquidity traders and suppliers after a new information on the fundamental value of the asset. We then derive the whole 'static" limit order book and its characteristics -namely the bid-ask spread and volumes available at each level price-from the interactions between the agents and compare it with the pre-existing model. We then discuss the case where noise traders have an impact on the fundamental value of the asset and extend the model to take into account many kinds of informed market makers.

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“…This is because they can rapidly marginally adjust their quotes to seize price priority. In the case of a large tick asset, speed is still an important feature as market participants have to compete for queue priority in the order book, see [17,20].…”

Section: Introductionmentioning

confidence: 99%

On bid and ask side-specific tick sizes

Baldacci,

Bergault,

Derchu

et al. 2020

Preprint

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The tick size, which is the smallest increment between two consecutive prices for a given asset, is a key parameter of market microstructure. In particular, the behavior of high frequency market makers is highly related to its value. We take the point of view of an exchange and investigate the relevance of having different tick sizes on the bid and ask sides of the order book. Using an approach based on the model with uncertainty zones, we show that when side-specific tick sizes are suitably chosen, it enables the exchange to improve the quality of liquidity provision.

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From Glosten-Milgrom to the Whole Limit Order Book and Applications to Financial Regulation

Cited by 5 publications

References 32 publications

From asymptotic properties of general point processes to the ranking of financial agents

From asymptotic properties of general point processes to the ranking of financial agents

Limit Order Book (LOB) shape modeling in presence of heterogeneously informed market participants

On bid and ask side-specific tick sizes

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