A Point Process Model for the Dynamics of Limit Order Books
By: Ekaterina Vinkovskaya
Publisher: [publisher not identified]
Published: 2014
Place of publication: [New York, N.Y.?]
Language: eng
Description: This thesis focuses on the statistical modeling of the dynamics of limit order books in electronic equity markets. The statistical properties of events affecting a limit order book -market orders, limit orders and cancellations- reveal strong evidence of clustering in time, cross-correlation across event types and dependence of the order flow on the bid-ask spread. Further investigation reveals the presence of a self-exciting property - that a large number of events in a given time period tends to imply a higher probability of observing a large number of events in the following time period. We show that these properties may be adequately represented by a multivariate self-exciting point process with multiple regimes that reflect changes in the bid-ask spread. We propose a tractable parametrization of the model and perform a Maximum Likelihood Estimation of the model using high-frequency data from the Trades and Quotes database for US stocks. We show that the model may be used to obtain predictions of order flow and that its predictive performance beats the Poisson model as well as Moving Average and Auto Regressive time series models.
Notes: Department: Statistics.

Thesis advisor: Rama Cont.

Thesis (Ph.D.)--Columbia University, 2014.