Arbitrage-free limit order books and the pricing of order flow risk
By: Bruce Lehmann.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13848; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13848.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "This paper builds on the landmark contribution of Glosten (1994) by treating the determination of limit order supply schedules as an exercise in asset pricing theory with the possible sizes of incoming market orders as the value-relevant states of nature, yielding an analogue of the Fundamental Theorem of Asset Pricing.  State prices and price impact prove to be proportional to the slope of the book and simple nonparametric and semiparametric models for limit order book dynamics arise when the price of order flow risk is constant over time, providing a comprehensive and coherent framework for organizing limit order book data"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/16/2008.

Includes bibliographical references.

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