Continuous time trading of a small investor in a limit order market
We provide a mathematical framework to model continuous time trading of a small investor in limit order markets. We show how elementary strategies can be extended in a suitable way to general continuous time strategies containing orders with infinitely many different limit prices. The general limit buy order strategies are predictable processes with values in the set of nonincreasing demand functions. It turns out that our strategy set of limit and market orders is closed, but limit orders can turn into market orders when passing to the limit, and any element can be approximated by a sequence of elementary strategies.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 123 (2013)
Issue (Month): 6 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/505572/description#description|
|Order Information:|| Postal: http://http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Giovanni Di Masi & Tomas Björk & Wolfgang Runggaldier & Yuri Kabanov, 1997.
"Towards a general theory of bond markets (*),"
Finance and Stochastics,
Springer, vol. 1(2), pages 141-174.
- Björk, Tomas & di Masi, Giovanni & Kabanov, Yuri & Runggaldier, Wolfgang, 1996. "Towards a General Theory of Bond Markets," SSE/EFI Working Paper Series in Economics and Finance 143, Stockholm School of Economics.
- Fabien Guilbaud & Huy�n Pham, 2013. "Optimal high-frequency trading with limit and market orders," Quantitative Finance, Taylor & Francis Journals, vol. 13(1), pages 79-94, January.
- Luciano Campi & Walter Schachermayer, 2006. "A super-replication theorem in Kabanov’s model of transaction costs," Finance and Stochastics, Springer, vol. 10(4), pages 579-596, December.
- Martin Šmíd, 2007. "On Uselessness of Limit Orders," Bulletin of the Czech Econometric Society, The Czech Econometric Society, vol. 14(24).
- Campi, Luciano & Schachermayer, Walter, 2006. "A super-replication theorem in Kabanov’s model of transaction costs," Economics Papers from University Paris Dauphine 123456789/5455, Paris Dauphine University.
- Hugh Luckock, 2003. "A steady-state model of the continuous double auction," Quantitative Finance, Taylor & Francis Journals, vol. 3(5), pages 385-404.
- Guasoni, Paolo & Lépinette-Denis, Emmanuel & Rásonyi, Miklós, 2012.
"The fundamental theorem of asset pricing under transaction costs,"
Economics Papers from University Paris Dauphine
123456789/9300, Paris Dauphine University.
- Paolo Guasoni & Emmanuel Lépinette & Miklós Rásonyi, 2012. "The fundamental theorem of asset pricing under transaction costs," Finance and Stochastics, Springer, vol. 16(4), pages 741-777, October.
- Martin Šmíd, 2007. "Are Limit Orders Rational?," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2007(4), pages 32-38.
- Aurélien Alfonsi & Alexander Schied, 2010. "Optimal trade execution and absence of price manipulations in limit order book models," Post-Print hal-00397652, HAL.
When requesting a correction, please mention this item's handle: RePEc:eee:spapps:v:123:y:2013:i:6:p:2011-2053. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.