Economy – Quantitative Finance – Trading and Market Microstructure
Scientific paper
2009-06-07
Economy
Quantitative Finance
Trading and Market Microstructure
18 pages, 12 figures
Scientific paper
We show that the statistics of spreads in real order books is characterized by an intrinsic asymmetry due to discreteness effects for even or odd values of the spread. An analysis of data from the NYSE order book points out that traders' strategies contribute to this asymmetry. We also investigate this phenomenon in the framework of a microscopic model and, by introducing a non-uniform deposition mechanism for limit orders, we are able to quantitatively reproduce the asymmetry found in the experimental data. Simulations of our model also show a realistic dynamics with a sort of intermittent behavior characterized by long periods in which the order book is compact and liquid interrupted by volatile configurations. The order placement strategies produce a non-trivial behavior of the spread relaxation dynamics which is similar to the one observed in real markets.
Alfi V.
Ciulla Fabio
Cristelli Matthieu
Pietronero Luciano
Zaccaria Andrea
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