Stochastic simulation framework for the Limit Order Book using liquidity motivated agents

Efstathios Panayi and Gareth Peters

Papers from arXiv.org

Abstract: In this paper we develop a new form of agent-based model for limit order books based on heterogeneous trading agents, whose motivations are liquidity driven. These agents are abstractions of real market participants, expressed in a stochastic model framework. We develop an efficient way to perform statistical calibration of the model parameters on Level 2 limit order book data from Chi-X, based on a combination of indirect inference and multi-objective optimisation. We then demonstrate how such an agent-based modelling framework can be of use in testing exchange regulations, as well as informing brokerage decisions and other trading based scenarios.

Date: 2015-01, Revised 2015-01
New Economics Papers: this item is included in nep-cmp and nep-mst
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1501.02447

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