Imperial College London
Alternate

ProfessorRamaCont

Faculty of Natural Sciences, Department of Mathematics

Visiting Professor
 
 
 
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Contact

 

+44 (0)20 7594 0802r.cont Website

 
 
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Location

 

806Weeks BuildingSouth Kensington Campus

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Summary

 

Publications

Citation

BibTex format

@article{Cont:2011:10.1137/110856605,
author = {Cont, R and Larrard, AD},
doi = {10.1137/110856605},
journal = {SIAM Journal on Financial Mathematics},
pages = {1--25},
title = {Price dynamics in a Markovian limit order market},
url = {http://dx.doi.org/10.1137/110856605},
volume = {4},
year = {2011}
}
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RIS format (EndNote, RefMan)

TY  - JOUR
AB  - We propose and study a simple stochastic model for the dynamics of a limitorder book, in which arrivals of market order, limit orders and ordercancellations are described in terms of a Markovian queueing system. Throughits analytical tractability, the model allows to obtain analytical expressionsfor various quantities of interest such as the distribution of the durationbetween price changes, the distribution and autocorrelation of price changes,and the probability of an upward move in the price, {\it conditional} on thestate of the order book. We study the diffusion limit of the price process andexpress the volatility of price changes in terms of parameters describing thearrival rates of buy and sell orders and cancelations. These analytical resultsprovide some insight into the relation between order flow and price dynamics inorder-driven markets.
AU  - Cont,R
AU  - Larrard,AD
DO  - 10.1137/110856605
EP  - 25
PY  - 2011///
SN  - 1945-497X
SP  - 1
TI  - Price dynamics in a Markovian limit order market
T2  - SIAM Journal on Financial Mathematics
UR  - http://dx.doi.org/10.1137/110856605
UR  - http://arxiv.org/abs/1104.4596v1
UR  - http://hdl.handle.net/10044/1/10538
VL  - 4
ER  -
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