Limit order book models

Picture taken from https://data.nasdaq.com/BookViewer.aspx

The market is a complex system in which many agents act with the purpose of maximizing their utility. The sum of the individuals’ actions, however, does not correspond to the behavior of the whole system that tends to a very fascinating self-organization that attracted the study of many theoretical physicists. Even if we are only at the beginning of such rigorous studies in this subject and only few stylized facts are known, the approach of physics proved to be able to give important elements in the microscopical modeling of financial market.

This project was the intership of my Master thesis and I worked under the supervision of Michael Benzaquen and Antoine Fosset to create a model capable of predicting the everage shape of the limit order book, as well as explaining why the variation of the price goes as the square root of the traded volume and not linearly, as predicted by the Kyle model.

Lorenzo Dall'Amico
Lorenzo Dall'Amico
Postdoctoral fellow

I am currently a postdoctoral fellow at the ISI foundation in Turin, Italy.