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Journal article

A limit order book model for latency arbitrage

Abstract:

We consider a single security market based on a limit order book and two investors, with different speeds of trade execution. If the fast investor can preempt the slower investor, we show that this allows the fast trader to obtain risk free profits, but that these profits cannot be scaled. We derive the fast trader's optimal behaviour when she has only distributional knowledge of the slow trader's actions, with few restrictions on the possible prior distributions. We also consider the slower ...

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Publisher copy:
10.1007/s11579-012-0082-5

Authors


Journal:
Mathematics and Financial Economics
Volume:
6
Issue:
3
Pages:
211-227
Publication date:
2012-06-05
DOI:
EISSN:
1862-9660
ISSN:
1862-9679
URN:
uuid:468e0d9b-810a-4182-a916-7316442e684a
Source identifiers:
351082
Local pid:
pubs:351082

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