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DownloadedBy:[MtSinaiSchoolofMedicine,LevyLibrary]At:23:1928April2008 Quantitative Finance, Vol. 8, No. 3, April 2008, 217224

Summary: DownloadedBy:[MtSinaiSchoolofMedicine,LevyLibrary]At:23:1928April2008
Quantitative Finance, Vol. 8, No. 3, April 2008, 217224
High-frequency trading in a limit order book
Mathematics, New York University, 251 Mercer Street, New York, NY 10012, USA
(Received 24 April 2006; in final form 3 April 2007)
1. Introduction
The role of a dealer in securities markets is to provide
liquidity on the exchange by quoting bid and ask prices
at which he is willing to buy and sell a specific quantity of
assets. Traditionally, this role has been filled by market-
maker or specialist firms. In recent years, with the growth
of electronic exchanges such as Nasdaq's Inet, anyone
willing to submit limit orders in the system can effectively
play the role of a dealer. Indeed, the availability of high
frequency data on the limit order book (see www.inetats.
com) ensures a fair playing field where various agents can
post limit orders at the prices they choose. In this paper,
we study the optimal submission strategies of bid and ask
orders in such a limit order book.


Source: Avellaneda, Marco - Department of Mathematics, Courant Institute of Mathematical Sciences, New York University


Collections: Mathematics