Characterizing limit order prices

R.M. Withanawasam, P.A. Whigham and Timothy Falcon Crack

Physica A: Statistical Mechanics and its Applications, 2013, vol. 392, issue 21, 5346-5355

Abstract: A computational model of a limit order book is used to study the effect of different limit order distribution offsets. Reference prices such as same side/contra side best market prices and last traded price are considered in combination with different price offset distributions. We show that when characterizing limit order prices, varying the offset distribution only produces different behavior when the reference price is the contra side best price. Irrespective of the underlying mechanisms used in computing the limit order prices, the shape of the price graph and the behavior of the average order book profile distribution are strikingly similar in all the considered reference prices/offset distributions. This implies that existing averaging methods can cancel variabilities in limit order book shape/attributes and may be misleading.

Keywords: Limit order markets; Market micro-structure models; Limit order pricing (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:392:y:2013:i:21:p:5346-5355

DOI: 10.1016/j.physa.2013.06.060

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