Market influence and order book strategies

Abstract

I review in this paper1 my findings on order driven market modeling. Following my previous works on robust agents based modeling in finance [1-3, 5], I study specific characteristics of order book markets. By controlling the descriptive time scale of the dynamics involved, I show how market impact, linear by definition, and trading strategies lead to precise pictures for clarifying order book dynamics, consistent with what is observed empirically. I then discuss more specifically the role of market impact in the created dynamics and structure of the book and the economic implications of my studies. © Springer-Verlag Italia 2011.