2006/07/05 by Tobias Preis, Sebastian Golke, Wolfgang Paul +1 · 1 citation
Economics, Econometrics and Finance · Mathematics · #Complex Systems and Time Series Analysis #Financial Risk and Volatility Modeling #Financial Markets and Investment Strategies #Stylized fact #Order (exchange) #Econometrics #Financial market #Economics #Order book #Hurst exponent #Exchange rate #Financial economics #Monetary economics #Finance #Mathematics #Macroeconomics #Statistics
paper · doi:10.1209/epl/i2006-10139-0
openalex publication_date 2006/07/05 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/30
We introduce a simple model for simulating financial markets, based on an order book, in which several agents trade one asset at a virtual exchange continuously. For a stationary market the structure of the model, the order flow rates of the different kinds of order types and the used price time priority matching algorithm produce only a diffusive price behavior. We show that a market trend, i.e. an asymmetric order flow of any type, leads to a non-trivial Hurst exponent for the price development, but not to "fat-tailed" return distributions. When one additionally couples the order entry depth to the prevailing trend, also the stylized empirical fact of "fat tails" can be reproduced by our Order Book Model.