Limit Order Books

This text presents different models of limit order books and introduces a flexible open-source library, useful to those studying trading strategies.

Frédéric Abergel (Author), Marouane Anane (Author), Anirban Chakraborti (Author), Aymen Jedidi (Author), Ioane Muni Toke (Author)

9781107163980, Cambridge University Press

Hardback, published 9 May 2016

238 pages
25.2 x 18.9 x 1.7 cm, 0.65 kg

A limit order book is essentially a file on a computer that contains all orders sent to the market, along with their characteristics such as the sign of the order, price, quantity and a timestamp. The majority of organized electronic markets rely on limit order books to store the list of interests of market participants on their central computer. A limit order book contains all the information available on a specific market and it reflects the way the market moves under the influence of its participants. This book discusses several models of limit order books. It begins by discussing the data to assess their empirical properties, and then moves on to mathematical models in order to reproduce the observed properties. Finally, the book presents a framework for numerical simulations. It also covers important modelling techniques including agent-based modelling, and advanced modelling of limit order books based on Hawkes processes. The book also provides in-depth coverage of simulation techniques and introduces general, flexible, open source library concepts useful to readers studying trading strategies in order-driven markets.

Foreword
Preface
Acknowledgements
List of tables
List of figures
1. A short introduction to limit order books
2. Statistical properties of limit order books: a survey
3. The order book shape as a function of the average size of limit orders
4. Empirical evidence of market making and market taking
5. Agent-based modelling of limit order books: a survey
6. The mathematical structure of zero-intelligence limit order book models
7. The order book as a queueing system
8. Advanced modelling of limit order books
9. Numerical simulation of limit order books
10. Market imperfection and predictability
Appendix A. A catalogue of order types on financial markets
Appendix B. Limit order book data
Appendix C. Some useful mathematical notions
Appendix D. Comparison of various prediction methods
Bibliography
Index.

Subject Areas: Business mathematics & systems [KJQ], Finance [KFF]