A Market-Clearing Role for Inefficiency on a Limit Order Book

Preprint OPEN
Jeremy Large;
(2006)
  • Subject: stochastic sequential game, ergodic equilibrium, market microstructure, limit order book, market depths, bid-ask spread
    • jel: jel:G14 | jel:G24 | jel:C73

Using a stochastic sequential game in ergodic equilibrium, this paper models limit order book trading dynamics. It deduces investor surplus and some agents` strategies from depth`s stationarity, while bypassing altogether agents` intricate forecasting problems. Market i... View more
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