Stochastic simulation framework for the Limit Order Book using liquidity motivated agents [article]

Efstathios Panayi, Gareth Peters
2015 arXiv   pre-print
In this paper we develop a new form of agent-based model for limit order books based on heterogeneous trading agents, whose motivations are liquidity driven. These agents are abstractions of real market participants, expressed in a stochastic model framework. We develop an efficient way to perform statistical calibration of the model parameters on Level 2 limit order book data from Chi-X, based on a combination of indirect inference and multi-objective optimisation. We then demonstrate how such
more » ... an agent-based modelling framework can be of use in testing exchange regulations, as well as informing brokerage decisions and other trading based scenarios.
arXiv:1501.02447v3 fatcat:3zdu4teht5didii5iijhvlplly