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A Multi Agent Model for the Limit Order Book Dynamics

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  • Marco Bartolozzi
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    Abstract

    In the present work we introduce a novel multi-agent model with the aim to reproduce the dynamics of a double auction market at microscopic time scale through a faithful simulation of the matching mechanics in the limit order book. The agents follow a noise decision making process where their actions are related to a stochastic variable, "the market sentiment", which we define as a mixture of public and private information. The model, despite making just few basic assumptions over the trading strategies of the agents, is able to reproduce several empirical features of the high-frequency dynamics of the market microstructure not only related to the price movements but also to the deposition of the orders in the book.

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    File URL: http://arxiv.org/pdf/1005.0182
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    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number 1005.0182.

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    Date of creation: May 2010
    Date of revision: Oct 2010
    Handle: RePEc:arx:papers:1005.0182

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