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Algorithmic trading, stochastic control, and mutually exciting processes

Abstract:

We develop a high frequency (HF) trading strategy where the HF trader uses her superior speed to process information and to post limit sell and buy orders. By introducing a multifactor mutually exciting process, we allow for feedback effects in market buy and sell orders and the shape of the limit order book (LOB). Our model accounts for the arrival of market orders that influence activity, trigger one-sided and two-sided clustering of trades, and induce temporary changes in the shape of the ...

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Publication status:
Published
Peer review status:
Peer reviewed
Version:
Accepted Manuscript

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Publisher copy:
10.1137/18M1176968

Authors


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Institution:
University of Oxford
Division:
Maths, Physical & Life Sciences
Department:
Mathematical Institute
ORCID:
0000-0002-7426-4645
Jaimungal, S More by this author
Publisher:
Society for Industrial and Applied Mathematics Publisher's website
Journal:
SIAM Review Journal website
Volume:
60
Issue:
3
Pages:
673–703
Publication date:
2018-08-08
Acceptance date:
2018-08-01
DOI:
ISSN:
1095-7200
Pubs id:
pubs:905665
URN:
uri:a43beae7-ed40-4848-b092-6aa1aef4ae96
UUID:
uuid:a43beae7-ed40-4848-b092-6aa1aef4ae96
Local pid:
pubs:905665

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