Bid-ask spread dynamics: large upward jump with geometric catastrophes

Bid-ask spread dynamics: large upward jump with geometric catastrophes Full article

Journal

RAIRO - Operations Research
ISSN: 0399-0559 , E-ISSN: 1290-3868

Output data

Year: 2024, Volume: 58, Number: 2, Pages: 1375-1399 Pages count : 25 DOI: 10.1051/ro/2024039

Tags

Markov models, limit order book, geometric catastrophes, liquidity fluctuations.

Authors

Cerda Hernández Jose Javier ¹ , Logachov Artem ² , Yambartsev Anatoly ³

Affiliations

1	Econometric Modelling and Data Science Research Group, National University of Engineering
2	Laboratory of Probability Theory and Mathematical Statistics
3	Department of Statistics, Institute of Mathematics and Statistics, University of Sãao Paulo

Funding (1)

Sobolev Institute of Mathematics

FWNF-2022-0010

We propose a simple continuous-time stochastic model for capturing the dynamics of a limit order book in the presence of liquidity fluctuations, manifested by gaps in filled price levels within the OB. Inspired by [D. Farmer, L. Gillemot, F. Lillo, S. Mike and A. Sen, Quant. Finance 4 (2004) 383–397.], we define a model for the dynamics of spread that incorporates liquidity fluctuations and undertake a comprehensive theoretical study of the model’s properties, providing rigorous proofs of several key asymptotic theorems. Furthermore, we show how large deviations manifest in the spread under this regime.

Cerda Hernández J.J. , Logachov A. , Yambartsev A.
Bid-ask spread dynamics: large upward jump with geometric catastrophes
RAIRO - Operations Research. 2024. V.58. N2. P.1375-1399. DOI: 10.1051/ro/2024039 WOS Scopus РИНЦ OpenAlex

Submitted:	Sep 19, 2023
Accepted:	Feb 10, 2024
Published online:	Apr 5, 2024
Published print:	Apr 10, 2024

Web of science:	WOS:001197566700004
Scopus:	2-s2.0-85190296408
Elibrary:	66167139
OpenAlex:	W4391772239

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