Diffusive behavior and the modeling of characteristic times in limit order executions

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dc.creatorEisler, Zoltan
dc.creatorKertesz, Janos
dc.creatorLillo, Fabrizio
dc.creatorMantegna, Rosario N.
dc.date2007-01-30
dc.date2008-12-21
dc.date.accessioned2026-07-07T12:20:41Z
dc.date.available2026-07-07T12:20:41Z
dc.descriptionWe present an empirical study of the first passage time (FPT) of order book prices needed to observe a prescribed price change Delta, the time to fill (TTF) for executed limit orders and the time to cancel (TTC) for canceled ones in a double auction market. We find that the distribution of all three quantities decays asymptotically as a power law, but that of FPT has significantly fatter tails than that of TTF. Thus a simple first passage time model cannot account for the observed TTF of limit orders. We propose that the origin of this difference is the presence of cancellations. We outline a simple model, which assumes that prices are characterized by the empirically observed distribution of the first passage time and orders are canceled randomly with lifetimes that are asymptotically power law distributed with an exponent lambda_LT. In spite of the simplifying assumptions of the model, the inclusion of cancellations is enough to account for the above observations and enables one to estimate characteristics of the cancellation strategies from empirical data.
dc.description17 pages, 9 figures, 6 tables, to appear in Quantitative Finance
dc.identifierhttps://arxiv.org/abs/physics/0701335
dc.identifierhttp://arxiv.org/abs/physics/0701335
dc.identifier.urihttp://salesiana.dossiersoluciones.com/handle/123456789/213134
dc.subjectPhysics and Society
dc.subjectData Analysis, Statistics and Probability
dc.subjectTrading and Market Microstructure
dc.titleDiffusive behavior and the modeling of characteristic times in limit order executions
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