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Modeling Liquidity Imbalance and Large Price Moves in Consolidated Order Books

Article arXiv papers · Author: A. O. Glekin et al.
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Summary

The paper combines empirical analysis of the consolidated order book for RTS index futures with a Poissonian multi-agent model. The model represents groups of agents submitting orders, and the researchers vary group parameters to simulate features observed in real order books. The stated targets include the bid-ask spread, the shape of the book, and large price changes.

The analysis considers two mechanisms for large moves: an imbalance in available liquidity across the book and an imbalance between buy and sell orders arriving in the order flow. The supplied description establishes these as modeled mechanisms, but gives no parameter estimates, calibration method, comparison with observed events, or results showing which mechanism matters more. Its application is also described in relation to RTS index futures, so the summary alone does not show how well the model carries over to other instruments or venues.

Key ideas

  • The paper empirically analyzes the consolidated order book for RTS index futures.
  • A Poissonian multi-agent model is used to simulate order book behavior.
  • Varying agent group parameters is intended to reproduce spreads and book profiles.
  • The study models large price moves caused by liquidity imbalance or order-flow imbalance.
  • The supplied description does not report model calibration or comparative validation results.

Tags

FuturesMarket microstructureStatisticsExecution
Full text
# On Simulation of Various Effects in Consolidated Order Book


# On Simulation of Various Effects in Consolidated Order Book









This paper consists of two parts. The first part is devoted to empirical analysis of consolidated order book (COB) for the index RTS futures. In the second part we consider Poissonian multi--agent model of the COB. By varying parameters of different groups of agents submitting orders to the book we are able to model various real life phenomenons. In particular we model the spread, the profile of the book and large price changes. Two different mechanisms of large price changes are considered in detail. One is the disbalance of liquidity in the COB and another is the disbalance of sell and buy orders in the order flow.

Shown in full with attribution under the source's licence. Licence: abstract CC0

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.