From Glosten-Milgrom to the whole limit order book and applications to financial regulation
Fuente:
arXiv
Salvato in:
| Autori principali: | , , , , |
|---|---|
| Natura: | Preprint |
| Pubblicazione: |
2019
|
| Soggetti: | |
| Accesso online: | |
| Tags: |
Aggiungi Tag
Nessun Tag, puoi essere il primo ad aggiungerne!!
|
| _version_ | 1866912299580653568 |
|---|---|
| author | Huang, Weibing Pulido, Sergio Rosenbaum, Mathieu Saliba, Pamela Sfendourakis, Emmanouil |
| author_facet | Huang, Weibing Pulido, Sergio Rosenbaum, Mathieu Saliba, Pamela Sfendourakis, Emmanouil |
| contents | We build an agent-based model for the order book with three types of market participants: informed trader, noise trader and competitive market makers. Using a Glosten-Milgrom like approach, we are able to deduce the whole limit order book (bid-ask spread and volume available at each price) from the interactions between the different agents. More precisely, we obtain a link between efficient price dynamic, proportion of trades due to the noise trader, traded volume, bid-ask spread and equilibrium limit order book state. With this model, we provide a relevant tool for regulators and market platforms. We show for example that it allows us to forecast consequences of a tick size change on the microstructure of an asset. It also enables us to value quantitatively the queue position of a limit order in the book. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_1902_10743 |
| institution | arXiv |
| publishDate | 2019 |
| record_format | arxiv |
| spellingShingle | From Glosten-Milgrom to the whole limit order book and applications to financial regulation Huang, Weibing Pulido, Sergio Rosenbaum, Mathieu Saliba, Pamela Sfendourakis, Emmanouil Trading and Market Microstructure We build an agent-based model for the order book with three types of market participants: informed trader, noise trader and competitive market makers. Using a Glosten-Milgrom like approach, we are able to deduce the whole limit order book (bid-ask spread and volume available at each price) from the interactions between the different agents. More precisely, we obtain a link between efficient price dynamic, proportion of trades due to the noise trader, traded volume, bid-ask spread and equilibrium limit order book state. With this model, we provide a relevant tool for regulators and market platforms. We show for example that it allows us to forecast consequences of a tick size change on the microstructure of an asset. It also enables us to value quantitatively the queue position of a limit order in the book. |
| title | From Glosten-Milgrom to the whole limit order book and applications to financial regulation |
| topic | Trading and Market Microstructure |
| url | https://arxiv.org/abs/1902.10743 |