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Digital Library of the
European Council for Modelling and Simulation |
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Title: |
Liquidity Trading On Stock Markets: Determinants Of The
Humped Shape Of The Order Book |
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Authors: |
Dániel Havran, István Margitai, Balázs Árpád Szűcs |
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Published in:
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(2012).ECMS
2012 Proceedings edited by: K. G. Troitzsch, M. Moehring, U. Lotzmann. European
Council for Modeling and Simulation. doi:10.7148/2012 ISBN:
978-0-9564944-4-3 26th
European Conference on Modelling and Simulation, Shaping reality through simulation Koblenz,
Germany, May 29 – June 1 2012 |
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Citation
format: |
Havran, D., Margitai,
I., & Szücs, B. A. (2012). Liquidity Trading On
Stock Markets: Determinants Of The Humped Shape Of The Order Book. ECMS 2012
Proceedings edited by: K. G. Troitzsch, M. Moehring, U. Lotzmann
(pp. 285-290). European Council for Modeling and Simulation. doi:10.7148/2012-0285-0290 |
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DOI: |
http://dx.doi.org/10.7148/2012-0285-0290 |
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Abstract: |
In
this paper we examine pure limit order markets in order to find out how
different trading strategies affect the shape of the order book. We
concentrate on liquid- ity trading, which implies
that any new information that would influence the fundamental value of the
traded as- set is excluded. The humped shape of the order book is a stylized
fact studied in the literature. We build a simulation model to explain the
position of this hump in a setting where liquidity takers and providers
submit buy and sell orders to complete their exogenous trading needs. We show
that under the above assumptions the ex- ogenous
impatience factor of liquidity traders determines the position of the hump. |
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