Order book modeling and financial stability

Alessio Emanuele Biondo ()
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Alessio Emanuele Biondo: University of Catania

Journal of Economic Interaction and Coordination, 2019, vol. 14, issue 3, No 3, 469-489

Abstract: Abstract This paper presents an agent-based model of the financial order book, and investigates whether the volatility of market prices can be reduced by means of specific policy interventions. The model is able to replicate the salient stylized facts of empirical data. Simulations show how market volatility is affected by two types of factors: individual characteristics of traders (i.e., behavioral heterogeneity, willingness to pay, and reaction to informative signals), and micro-structural features of the order book (i.e., the duration of limit orders and the number of allowed counterparts for market orders).

Keywords: Order book; Financial stability; Agent based models; Simulations (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s11403-018-0227-6

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