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Stochastic order book modelling

Abstract : This thesis presents some aspects of stochastic order book modelling. In the first part, we analyze a model in which order arrivals are independent Poisson. We show that the order book is stable (in the sense of Markov chains) and that it converges to its stationary state exponentially fast. We deduce that the price generated in this setting converges to a Brownian motion at large time scales. We illustrate the results numerically and compare them to market data. In the second part, we generalize the results to a setting in which arrival times are governed by self and mutually existing processes. The last part is more applied and deals with the identification of a realistic multivariate model from the order flow. We describe two approaches: the first based on maximum likelihood estimation and the second on the covariance density function, and obtain a remarkable agreement with the data. We apply the estimated model to two specific algorithmic trading problems, namely the measurement of the execution probability of a limit order and its cost.
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Submitted on : Wednesday, May 28, 2014 - 10:39:08 AM
Last modification on : Thursday, October 8, 2020 - 3:25:29 AM
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  • HAL Id : tel-00997433, version 1



Aymen Jedidi. Stochastic order book modelling. Other. Ecole Centrale Paris, 2014. English. ⟨NNT : 2014ECAP0001⟩. ⟨tel-00997433⟩



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