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SUMMARY:Price dynamics in limit order markets: a multi-scale stochastic mo
 del and its hydrodynamic limit - Cont\, R (Imperial College London)
DTSTART:20141008T104500Z
DTEND:20141008T111500Z
UID:TALK55028@talks.cam.ac.uk
CONTACT:Mustapha Amrani
DESCRIPTION:The advent of high frequency trading has changed the landscape
  of financial markets\, leading to a heterogeneous environment where marke
 t participants with a wide range of trading frequencies interact through t
 he limit order book. We propose a stochastic model for dynamics of price a
 nd order flow in a limit order market\, which captures the coexistence of 
 high frequency and low frequency order flow and examines the consequences 
 of this heterogeneity on price dynamics\, volatility and liquidity. \nWe d
 erive scaling limits of the model under different assumptions on the order
  flow : one variant yields as hydrodynamic limit the Lasry-Lions (2007) pr
 ice formation model\, providing a micro-structural foundation for this mod
 el\, while another set of assumptions leads to a two-phase moving boundary
  problem.\n
LOCATION:Seminar Room 1\, Newton Institute
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