Hydrodynamic limit of order-book dynamics
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AbstractIn this paper, we establish a fluid limit for a two-sided Markov order book model. The main result states that in a certain asymptotic regime, a pair of measure-valued processes representing the “sell-side shape” and “buy-side shape” of an order book converges to a pair of deterministic measure-valued processes in a certain sense. We also test the fluid approximation on data. The empirical results suggest that the approximation is reasonably good for liquidly traded stocks in certain time periods.
All Author(s) ListXuefeng Gao, Shijie Deng
Journal nameProbability in the Engineering and Informational Sciences
Year2017
Volume Number32
Issue Number1
PublisherCambridge University Press
Place of PublicationUK
ISSN0269-9648
eISSN1469-8951
LanguagesEnglish-United States