Demand Storage, Market Liquidity, and Price Volatility
The limit order book is a device for storing demand and effecting trades that is the primary mechanism for price formation in most modern financial markets. We study the limit order book under a random process model of order flow, using simulations and an analytic treatment based on a master equatio...
| Autores principales: | , , , |
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| Formato: | Libro |
| Publicado: |
2013
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| _version_ | 1826257885859938304 |
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| author | Daniels, MG Farmer, J Iori, G Smith, E |
| author_facet | Daniels, MG Farmer, J Iori, G Smith, E |
| author_sort | Daniels, MG |
| collection | OXFORD |
| description | The limit order book is a device for storing demand and effecting trades that is the primary mechanism for price formation in most modern financial markets. We study the limit order book under a random process model of order flow, using simulations and an analytic treatment based on a master equation. We make testable predictions of the price diffusion rate, the depth of stored demand vs. price, the bid-ask spread, and the price impact. Our model provides an explanation for the empirically observed concave form of the price impact function. |
| first_indexed | 2024-03-06T18:25:16Z |
| format | Book |
| id | oxford-uuid:07ba8b07-9dee-4197-88c4-f51e18a1f37e |
| institution | University of Oxford |
| last_indexed | 2024-03-06T18:25:16Z |
| publishDate | 2013 |
| record_format | dspace |
| spelling | oxford-uuid:07ba8b07-9dee-4197-88c4-f51e18a1f37e2022-03-26T09:09:16ZDemand Storage, Market Liquidity, and Price VolatilityBookhttp://purl.org/coar/resource_type/c_1843uuid:07ba8b07-9dee-4197-88c4-f51e18a1f37eSymplectic Elements at Oxford2013Daniels, MGFarmer, JIori, GSmith, EThe limit order book is a device for storing demand and effecting trades that is the primary mechanism for price formation in most modern financial markets. We study the limit order book under a random process model of order flow, using simulations and an analytic treatment based on a master equation. We make testable predictions of the price diffusion rate, the depth of stored demand vs. price, the bid-ask spread, and the price impact. Our model provides an explanation for the empirically observed concave form of the price impact function. |
| spellingShingle | Daniels, MG Farmer, J Iori, G Smith, E Demand Storage, Market Liquidity, and Price Volatility |
| title | Demand Storage, Market Liquidity, and Price Volatility |
| title_full | Demand Storage, Market Liquidity, and Price Volatility |
| title_fullStr | Demand Storage, Market Liquidity, and Price Volatility |
| title_full_unstemmed | Demand Storage, Market Liquidity, and Price Volatility |
| title_short | Demand Storage, Market Liquidity, and Price Volatility |
| title_sort | demand storage market liquidity and price volatility |
| work_keys_str_mv | AT danielsmg demandstoragemarketliquidityandpricevolatility AT farmerj demandstoragemarketliquidityandpricevolatility AT iorig demandstoragemarketliquidityandpricevolatility AT smithe demandstoragemarketliquidityandpricevolatility |