A copy of this work was available on the public web and has been preserved in the Wayback Machine. The capture dates from 2017; you can also visit the original URL.
The file type is application/pdf
.
Forecasting prices from level-I quotes in the presence of hidden liquidity
2011
Algorithmic Finance
Bid and ask sizes at the top of the order book provide information on short-term price moves. Drawing from classical descriptions of the order book in terms of queues and order-arrival rates (Smith et al (2003) ), we consider a diffusion model for the evolution of the best bid/ask queues. We compute the probability that the next price move is upward, conditional on the best bid/ask sizes and an additional parameter, the hidden liquidity of the market. We provide closed-form solutions for the
doi:10.3233/af-2011-004
fatcat:jsfznu7bn5fdlg75kappcxayqi