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Order-Book Modeling and Market Making Strategies

Xiaofei Lu & Frédéric Abergel

Market Microstructure and Liquidity2018https://doi.org/10.1142/s2382626619500035article
ABDC B
Weight
0.38

What the paper says

Market making is one of the most important aspects of algorithmic trading, and it has been studied quite extensively from a theoretical point of view. The practical implementation of so-called “optimal strategies” however suffers from the failure of most order-book models to faithfully reproduce the behavior of real market participants. This paper is two-fold. First, some important statistical properties of order-driven markets are identified, advocating against the use of purely Markovian order-book models. Then, market making strategies are designed and their performances are compared, based on simulation as well as backtesting. We find that incorporating some simple non-Markovian features in the limit order book greatly improves the performances of market making strategies in a realistic context.

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https://doi.org/https://doi.org/10.1142/s2382626619500035

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@article{xiaofei2018,
  title        = {{Order-Book Modeling and Market Making Strategies}},
  author       = {Xiaofei Lu & Frédéric Abergel},
  journal      = {Market Microstructure and Liquidity},
  year         = {2018},
  doi          = {https://doi.org/https://doi.org/10.1142/s2382626619500035},
}

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Order-Book Modeling and Market Making Strategies

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Evidence weight

0.38

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.08 × 0.4 = 0.03
M · momentum0.80 × 0.15 = 0.12
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.