Berlin 2008 – wissenschaftliches Programm
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AKSOE: Arbeitskreis Physik sozio-ökonomischer Systeme
AKSOE 3: Financial Markets and Risk Management I
AKSOE 3.2: Vortrag
Montag, 25. Februar 2008, 10:45–11:15, EW 203
Studies of the limit order book around large price changes — •Bence Toth1,2, Janos Kertesz2, and J. Doyne Farmer3 — 1Complex Systems Lagrange Lab, ISI Foundation, Torino, Italy — 2Department of Theoretical Physics, Budapest University of Technology and Economics, Budapest, Hungary — 3Santa Fe Institute, Santa Fe, USA
Most of the financial markets today are governed by a continuous double auction mechanism, with a limit order book containing the orders placed to buy or sell a stock. We study the dynamics of this limit order book of liquid stocks on the London Stock Exchange (LSE) after experiencing a large intra-day price change. Previous studies of Trade and Quote data[1] revealed interesting results about the volume, volatility and bid-ask spread for these periods. The analysis of the order book at the level of single orders gives insight to the the "microscopic" dynamics of price formation, especially to the role of liquidity thus it enhances our understanding of market risk.
[1] A.G. Zawadowski, G. Andor and J. Kertész, Quantitative Finance 6, 283-295 (2006)