Price Tails in the Smith and Farmer's Model

Journal Article

Šmíd Martin

serial: Bulletin of the Czech Econometric Society vol.15, 25 (2008), p. 31-40

research: CEZ:AV0Z10750506

project(s): GA402/07/1113GA ČR, GA402/06/1417GA ČR

keywords: limit order market, continuous double auction, price increments, fat tails, tail exponent

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abstract (eng):

We analytically prove that the tails of the price increments in the model by Smith et al. [2003] are fat with the tail exponent one if the initial order books are empty; however, they become thin if an initial call auction is held before the start of the trading. This way, our results point out to the stabilizing role of the initial call auction.

abstract (cze):

Chvosty rozdělení ceny v Smithově a Farmerově modelu

RIV: AH