Institute of Information Theory and Automation

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Publication details

Probabilistic Properties of the Continuous Double Auction - Uniform Case

Research Report

Šmíd Martin


publisher: ÚTIA AV ČR, (Praha 2008)

edition: Research Report 2216

research: CEZ:AV0Z10750506

project(s): GA402/06/1417, GA ČR

keywords: continuous double auction, distribution

abstract (eng):

We study probabilistic properties of a zero intelligence model of a limit order market, very similar to those of Maslov [2000] and Smith at. al. [2003]. We (recursively) describe the distributions of the order books and the best quotes. Based on these theoretical results, we propose a procedure for statistical inference of the model and we show the way how to simulate the evolution of the process more efficiently then by the simulation of all the events. We prove that the price increments may be fat tailed if there is no initial order book but they are thin-tailed given a non-empty (Poisson distributed) order book. Finally, we show that, by a discretization of our model, the model of Smith et. al. [2003] is obtained and that a majority of our results is applicable to this model too.

RIV: BB

2012-12-21 16:10