Exact Hurst exponent and crossover behavior in a limit order market model

DOI10.1016/S0378-4371(02)01217-7zbMATH Open1001.91038arXivcond-mat/0206446OpenAlexW2077164375MaRDI QIDQ1847461FDOQ1847461

Authors: R. D. Willmann, G. M. Schütz, Damien Challet 

Publication date: 26 November 2002

Published in: Physica A (Search for Journal in Brave)

Abstract: An exclusion particle model is considered as a highly simplified model of a limit order market. Its price behavior reproduces the well known crossover from over-diffusion (Hurst exponent H>1/2) to diffusion (H=1/2) when the time horizon is increased, provided that orders are allowed to be canceled. For early times a mapping to the totally asymmetric exclusion process yields the exact result H=2/3 which is in good agreement with empirical data. The underlying universality class of the exclusion process suggests some robustness of the exponent with respect to changes in the trading rules. In the crossover regime the Hurst plot has a scaling property where the bulk deposition/cancellation rate is the critical parameter. Analytical results are fully supported by numerical simulations.

Full work available at URL: https://arxiv.org/abs/cond-mat/0206446

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zbMATH Keywords

universality classcritical parameterexclusion particle model

Mathematics Subject Classification ID

Applications of statistical and quantum mechanics to economics (econophysics) (91B80) Microeconomic theory (price theory and economic markets) (91B24) Financial applications of other theories (91G80)

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Cited In (12)

• Price dynamics in an order-driven market with Bayesian learning
• Non-constant rates and over-diffusive prices in a simple model of limit order markets
• Conformal invariance in conditioned stochastic particle systems
• Dynamical transition in the TASEP with Langmuir kinetics: mean-field theory
• Studies of the limit order book around large price changes
• Interacting gaps model, dynamics of order book, and stock-market fluctuations
• Simple stochastic order-book model of swarm behavior in continuous double auction
• Unbalanced Langmuir kinetics affects TASEP dynamical transitions: mean-field theory
• Limit order market analysis and modelling: on a universal cause for over-diffusive prices
• More statistical properties of order books and price impact
• Velocity control for improving flow through a bottleneck
• HURST EXPONENTS IN FUTURES EXCHANGE MARKETS

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