A multi agent model for the limit order book dynamics
Research Group, Boronia Capital, 2065 Sydney NSW, Australia
2 Australia Special Research Centre for the Subatomic Structure of Matter (CSSM), University of Adelaide, 5005 Adelaide SA, Australia
Corresponding author: a email@example.com
Revised: 3 October 2010
Published online: 12 November 2010
In the present work we introduce a novel multi-agent model with the aim to reproduce the dynamics of a double auction market at microscopic time scale through a faithful simulation of the matching mechanics in the limit order book. The agents follow a noise decision making process where their actions are related to a stochastic variable, the market sentiment, which we define as a mixture of public and private information. The model, despite making just few basic assumptions over the trading strategies of the agents, is able to reproduce several empirical features of the high-frequency dynamics of the market microstructure not only related to the price movements but also to the deposition of the orders in the book.
© EDP Sciences, Società Italiana di Fisica, Springer-Verlag, 2010