2019/10/21 by Jan Rosenzweig, Rosenzweig, Jan
Economics, Econometrics and Finance · #FOS: Economics and business #Trading and Market Microstructure (q-fin.TR) #q-fin.TR
paper · pdf · doi:10.48550/arxiv.1910.09202
arxiv created 2020/12/08 · arxiv updated 2020/12/09
We present a class of macroscopic models of the Limit Order Book to simulate the aggregate behaviour of market makers in response to trading flows. The resulting models are solved numerically and asymptotically, and a class of similarity solutions linked to order book formation and recovery is explored. The main result is that order book recovery from aggressive liquidity taking follows a simple t1/3 scaling law.