A FUNCTIONAL LIMIT THEOREM FOR LIMIT ORDER BOOKS WITH STATE DEPENDENT PRICE DYNAMICS

• 成果类型: Article
• 署名作者: Bayer, Christian; Horst, Ulrich; Qiu, Jinniao
• 署名单位: Leibniz Association; Weierstrass Institute for Applied Analysis & Stochastics; Humboldt University of Berlin; University of Michigan System; University of Michigan
• 刊物名称: ANNALS OF APPLIED PROBABILITY
• ISSN/ISSBN: 1050-5164
• DOI: 10.1214/16-AAP1265
• 发表日期: 2017
• 页码: 2753-2806
• 关键词: markets; MODEL

摘要

We consider a stochastic model for the dynamics of the two-sided limit order book (LOB). Our model is flexible enough to allow for a dependence of the price dynamics on volumes. For the joint dynamics of best bid and ask prices and the standing buy and sell volume densities, we derive a functional limit theorem, which states that our LOB model converges in distribution to a fully coupled SDE-SPDE system when the order arrival rates tend to infinity and the impact of an individual order arrival on the book as well as the tick size tends to zero. The SDE describes the bid/ask price dynamics while the SPDE describes the volume dynamics.