Order-book dynamics

František Slanina

in Essentials of Econophysics Modelling

Published in print December 2013 | ISBN: 9780199299683
Published online January 2014 | e-ISBN: 9780191747038 | DOI:
Order-book dynamics

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In this chapter we show how to model the book of orders, which is the hidden layer behind the stock-price fluctuations. The models are chiefly based on the representation of orders to buy or sell as two species of particles which are deposited, diffuse, and react. The theory of reaction-diffusion processes in one dimension is used, but we go beyond that. Several deposition-evaporation models are presented and compared. The principal tool is computer simulation, but analytical approaches are also used, employing mean-field approximation and matrix multiplicative processes. Simple schematic models are studied, based on one-dimensional systems of interacting particles and on the queuing theory.

Keywords: Order book; reaction-diffusion; deposition; one-dimensional; queuing

Chapter.  20824 words.  Illustrated.

Subjects: Mathematical and Statistical Physics

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