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CATEGORIES:Optimization and Incentives Seminar
SUMMARY:A Markov model of a limit order book: thresholds\,
recurrence\, and trading strategies - Frank Kelly
(University of Cambridge)
DTSTART;TZID=Europe/London:20150609T140000
DTEND;TZID=Europe/London:20150609T150000
UID:TALK59717AThttp://talks.cam.ac.uk
URL:http://talks.cam.ac.uk/talk/index/59717
DESCRIPTION:In this talk we introduce an analytically tractabl
e model of a limit order book where the dynamics a
re driven by stochastic fluctuations between suppl
y and demand. The model has a natural interpretati
on for a highly traded market on short time-scales
where there is a separation between the time-scal
e of trading\, represented in the model\, and a lo
nger time-scale on which fundamentals change.\n\nW
e describe our main result for the model\, which i
s the existence of an explicit limiting distributi
on for the highest bid\, and for the lowest ask\,
where the limiting distributions are confined betw
een two thresholds. Fluid limits play an important
role in establishing the recurrence properties of
the model.\n\nWe use our model to analyze various
high-frequency trading strategies (for example ma
rket-making\, sniping and mixtures of these)\, and
comment on the Nash equilibria that emerge betwee
n high-frequency traders when a market in continuo
us time is replaced by frequent batch auctions.\n\
nThis is joint work with Elena Yudovina\, Universi
ty of Minnesota.\n\nhttp://www.statslab.cam.ac.uk/
~frank/TALKS/lob.html
LOCATION:MR12\, Centre for Mathematical Sciences\, Wilberfo
rce Road\, Cambridge
CONTACT:Felix Fischer
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