Abstract:The latent order book of [Donier et al., 2015, A fully consistent, minimal model for nonlinear market impact, Quantitative Finance 15(7), 1109–1121] is one of the most promising agent-based models for market impact. This work extends the minimal model by allowing agents to exhibit mean-reversion, a commonly observed pattern in real markets. This modification leads to new order book dynamics, which we explicitly study and analyze. Underlying our analysis is a mean-field assumption that views the order book thro… Show more
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