Limit Order Books

Abergel, Frédéric; Chakraborti, Anirban; Jedidi, Aymen; Toke, Ioane Muni; Anane, Marouane

doi:10.1017/cbo9781316683040

Cited by 78 publications

(67 citation statements)

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“…In the work of [Huang et al, 2015], and many other related works, the order size is supposed to be constant. It is however clear from empirical analyses that the order sizes have remarkable statistical properties, and that such information is relevant to the LOB dynamics, see for instance [Abergel et al, 2016][Muni Toke, 2015 [Rambaldi et al, 2017].…”

Section: Figure 2: Queue Reactive Model Order Intensitiesmentioning

confidence: 99%

“…these actual microstructural properties of the order book play a fundamental role in assessing the profitability of market making strategies. There now exists an abundant literature on order book modelling, and the reader is referred to [Abergel et al, 2016] for an extensive study of the subject, but, as regards market making strategies -or more general trading strategies, for that matter -only very recent papers such as [Abergel et al, 2017] actually address the market making problem using a full order book model.…”

Section: Introductionmentioning

confidence: 99%

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Order-Book Modeling and Market Making Strategies

Abergel

2018

Mark. Microstructure Liq.

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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 socalled "optimal strategies" however suffers from the failure of most order book models to faithfully reproduce the behaviour of real market participants.This paper is twofold. First, some important statistical properties of order driven markets are identified, advocating against the use of purely Markovian order book models. Then, market making strategies are designed and their performances are compared, based on simulation as well as backtesting. We find that incorporating some simple non-Markovian features in the limit order book greatly improves the performances of market making strategies in a realistic context.

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Section: Figure 2: Queue Reactive Model Order Intensitiesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Order-Book Modeling and Market Making Strategies

Abergel

2018

Mark. Microstructure Liq.

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“…Due to their obvious relevance to the understanding of financial markets, limit order books have been extensively studied in the past decade, both from empirical and mathematical points of view, see Abergel et al (2016) for a survey of their properties. In particular, the mathematical modelling of limit order books is itself an active research area that has many useful and practical applications, and this paper is a contribution to the field.…”

Section: Introductionmentioning

confidence: 99%

High-dimensional Hawkes processes for limit order books: modelling, empirical analysis and numerical calibration

Abergel

2018

Quantitative Finance

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High-dimensional Hawkes processes with exponential kernels are used to describe limit order books in order-driven financial markets. The dependencies between orders of various types are carefully studied and modelled, based on a thorough empirical analysis. The observation of inhibition effects is particularly interesting, and leads us to the use of non-linear Hawkes processes. A specific attention is devoted to the calibration problem, in order to account for the high dimensionality of the problem and the very poor convexity properties of the MLE. Our analyses show a good agreement between the statistical properties of order book data and those of the model.

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“…One of the most important issues along this line of research is power laws associated with asset price fluctuations, and several models describing asset price dynamics were proposed Richmond et al (2013), Abergel (2016). In particular, asset price bubbles were regarded as an important research topic.…”

Section: Introductionmentioning

confidence: 99%

Power laws in market capitalization during the dot-com and Shanghai bubble periods

Mizuno

Ohnishi

Watanabe

2016

Evolut Inst Econ Rev

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The distributions of market capitalization across stocks listed in the NASDAQ and Shanghai stock exchanges have power law tails. The power law exponents associated with these distributions fluctuate around one, but show a substantial decline during the dot-com bubble in 1997-2000 and the Shanghai bubble in 2007. In this paper, we show that the observed decline in the power law exponents is closely related to the deviation of the market values of stocks from their fundamental values. Specifically, we regress market capitalization of individual stocks on financial variables, such as sales, profits, and asset sizes, using the entire sample period to identify variables with substantial contributions to fluctuations in fundamentals. Based on the regression results for stocks listed in the NASDAQ, we argue that the fundamental value of a company is well captured by the value of its net asset; therefore, a price-to-book ratio (PBR, P/B Ratio) is a good measure of the deviation from fundamentals. We show that the PBR distribution across stocks listed in the NASDAQ has a much heavier upper tail in 1997 than in the other years, suggesting that stock prices deviate from fundamentals & Takayuki Mizuno

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Limit Order Books

Cited by 78 publications

References 0 publications

Order-Book Modeling and Market Making Strategies

Order-Book Modeling and Market Making Strategies

High-dimensional Hawkes processes for limit order books: modelling, empirical analysis and numerical calibration

Power laws in market capitalization during the dot-com and Shanghai bubble periods

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