Dynamics of Order Positions and Related Queues in a Limit Order Book

42 Pages Posted: 20 May 2015 Last revised: 14 Oct 2015

See all articles by Xin Guo

Xin Guo

University of California, Berkeley - Department of Industrial Engineering and Operations Research

Zhao Ruan

University of California, Berkeley

Lingjiong Zhu

University of Minnesota - Minneapolis

Date Written: October 13, 2015

Abstract

Order positions are key variables in algorithmic trading. This paper studies the limiting behavior of order positions and related queues in a limit order book. In addition to the fluid and diffusion limits for the processes, fluctuations of order positions and related queues around their fluid limits are analyzed. As a corollary, explicit analytical expressions for various quantities of interests in a limit order book are derived.

Keywords: Limit Order Book, Order Position, Queue Length, Fluid Limit, Functional Central Limit Theorems, Large Deviations

JEL Classification: C00, C60, C69, N20

Suggested Citation

Guo, Xin and Ruan, Zhao and Zhu, Lingjiong, Dynamics of Order Positions and Related Queues in a Limit Order Book (October 13, 2015). Available at SSRN: https://ssrn.com/abstract=2607702 or http://dx.doi.org/10.2139/ssrn.2607702

Xin Guo (Contact Author)

University of California, Berkeley - Department of Industrial Engineering and Operations Research ( email )

4141 Etcheverry Hall
Berkeley, CA 94720-1777
United States

Zhao Ruan

University of California, Berkeley ( email )

IEOR Department
4135 Etcheverry Hall
Berkeley, CA 94720
United States

Lingjiong Zhu

University of Minnesota - Minneapolis ( email )

206 Church Street SE
Minneapolis, MN 55455
United States

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