A Multi Agent Model for the Limit Order Book Dynamics
AbstractIn 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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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1005.0182.
Date of creation: May 2010
Date of revision: Oct 2010
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-15 (All new papers)
- NEP-CMP-2010-05-15 (Computational Economics)
- NEP-CTA-2010-05-15 (Contract Theory & Applications)
- NEP-MST-2010-05-15 (Market Microstructure)
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