Limit order book as a market for liquidity

• 成果类型: Article
• 署名作者: Foucault, T; Kadan, O; Kandel, E
• 署名单位: Hebrew University of Jerusalem; Hebrew University of Jerusalem; Washington University (WUSTL); Hautes Etudes Commerciales (HEC) Paris
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhi029
• 发表日期: 2005
• 页码: 1171
• 关键词: EMPIRICAL-ANALYSIS; provision; auctions; anatomy; volume; COSTS; depth; MODEL

摘要

We develop a dynamic model of a limit order market populated by strategic liquidity traders of varying impatience. In equilibrium, patient traders tend to submit limit orders, whereas impatient traders submit market orders. Two variables are the key determinants of the limit order book dynamics in equilibrium: the proportion of patient traders and the order arrival rate. We offer several testable implications for various market quality measures such as spread, trading frequency, market resiliency, and time to execution for limit orders. Finally, we show the effect of imposing a minimal price variation on these measures.