Transcription of High-frequency trading in a limit order book
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High-frequency trading in a limit order book
Quantitative Finance, Vol. 8, No. 3, April 2008, 217 224. Downloaded By: [Mt Sinai School of Medicine, Levy Library] At: 23:19 28 April 2008. High-frequency trading in a limit order book MARCO AVELLANEDA and SASHA STOIKOV*. Mathematics, New York University, 251 Mercer Street, New York, NY 10012, USA. (Received 24 April 2006; in final form 3 April 2007). 1. Introduction inventory risk arising from uncertainty in the asset's value and (ii) the asymmetric information risk arising from The role of a dealer in securities markets is to provide informed traders. Useful surveys of their results can liquidity on the exchange by quoting bid and ask prices be found in Biais et al. (2004), Stoll (2003) and a book by at which he is willing to buy and sell a specific quantity of O'Hara (1997). In this paper, we will focus on the assets. Traditionally, this role has been filled by market- inventory effect.
High-frequency trading in a limit order book MARCO AVELLANEDA and SASHA STOIKOV* ... the limit order book, by considering the probability with which his quotes will be executed as a function of their ... dimensional Brownian motion and is constant.y
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