Académique Documents
Professionnel Documents
Culture Documents
Sebastian Jaimungal
University of Toronto
Jan, 2018
Álvaro Cartea,
Sebastian Jaimungal,
and
José Penalva
Cambridge University Press
(Aug, 2015)
Fréd’eric Abergel, Jean-Philippe Olivier Guéant,
Bouchaud, Thierry Foucault,
Charles-Albert Lehalle, and Chapman and Hall/CRC (2016)
Mathieu Rosenbaum
Wiley (2012)
Introduction
Introduction
I Thus, large orders are broken up in small ones and these are
traded over time (minutes, hours, days, weeks, or even
months) and across different venues.
I limit sell order with the lowest price is known as the best
offer/ask
I The difference between the best bid & offer is called the
spread
33.8
Price
33.75
33.7
33.65
$23.14
Ask Side Figure: LOB illustration of a buy
$23.12 Ask Price
LO added to the queue at the best
Prices
Quoted Spread
bid.
Midprice
$23.10
Bid Price
$23.08
Bid Side
$23.06
0 100 200 300 400 500
Available Depth
$23.14 $23.14
Ask Side Ask Side
$23.12 $23.12
Prices
Prices
$23.10 Add Buy LO =⇒ $23.10
$23.08 $23.08
Bid Side Bid Side
$23.06 $23.06
0 100 200 300 400 500 0 100 200 300 400 500
Available Depth Available Depth
Limit Order Book
$23.14 $23.14
Ask Side Ask Side
$23.12 $23.12
Prices
Prices
$23.10 =⇒ $23.10
$23.08 $23.08
Bid Side Bid Side
$23.06 $23.06
0 100 200 300 400 500 0 100 200 300 400 500
Available Depth Available Depth
$23.14 $23.14
Ask Side Ask Side
Prices
$23.10 =⇒ $23.10
$23.08 $23.08
Bid Side Bid Side
$23.06 $23.06
0 100 200 300 400 500 0 100 200 300 400 500
Available Depth Available Depth
Figure: LOB: a sell MO walking the LOB with and without re-routing.
Limit Order Book
-7
10
-8
10
10 12 14 16
Time
Limit Order Book
Trade Activity
33.75
33.7
0 1 2 3 4 5
Time
Limit Order Book
Trade Activity
33.6
33.55
0 1 2 3 4 5
Time
Limit Order Book
Trade Activity
33.55
33.5
0 1 2 3 4 5
Time
Limit Order Book
5 0.06
log(1 + λ)
4
3 0.04
2
0.02
1
0 0
10:00 12:00 14:00 16:00
Time
Limit Order Book
14 0.1
log(1+volume) 0.08
12
0.06
10
0.04
8
0.02
6 0
10:00 12:00 14:00 16:00
Time
Order Imbalance
Order Imbalance
I Order Imbalance measures whether the LOB is buy or sell
heavy
V b − Vta
ρt = ta ∈ [−1 , +1]
Vt + Vtb
I Order imbalance is a good predictor of trade direction
0.5
Imbalance
-0.5
-1
10:00 10:01 10:02
Time
Order Imbalance
0.5
Imbalance
-0.5
-1
10:15 10:16 10:17
Time
Order Imbalance
buy
0.3 sell
total
Arrival Rate
0.25
0.2
0.15
0.1
0.05
0
1 2 3 4 5
Regime
Order Imbalance
I Distribution of midprice change 10ms after a market order.
Sell-Heavy
Neutral
15000 Buy-Heavy
10000
5000
0
−3 −2 −1 0 1 2 3
Midprice Change
Sell-Heavy
Neutral
15000 Buy-Heavy
10000
5000
0
−3 −2 −1 0 1 2 3
Midprice Change
Sell-Heavy
Neutral
15000 Buy-Heavy
10000
5000
0
−3 −2 −1 0 1 2 3
Midprice Change