Project for the MFM Workshop - Winter 2021.
The project aims to explore the fundamental of market microstructure, such as order-matching algorithms, quantifying order impacts, and theoretical models such as the Hawkes process.
Some terminologies:
- Market Order: order that matches at arrival
- Limit Order: order that does not match at arrival
- Limit Order Book (LOB): table recording the limit orders
- Best Bid Price: highest stated price among buy limits
- Best Ask Price: lowest stated price among sell limits
- Bid Ask Spread: Best Ask Price - Best Bid Price
- Lot Size: smallest amount of the asset that can be traded within the given LOB
- Tick Size: smallest permissible price interval between different orders
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For an excellent text, see Trades, Quotes and Prices: Financial Markets under the Microscope; Bouchard , Bonart, Donier, Gould.
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Impact of the LOB on price
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Hawkes model:
- https://arxiv.org/abs/1412.7096
- https://stmorse.github.io/journal/Hawkes-python.html
- Excellent python library for Hawkes processes: https://x-datainitiative.github.io/tick/index.html
We looked at S&P 500 minis and WTI (Oil) futures.
The data for this project is taken from the CME group, licensed to the UMN. The data information and code book and be found here.
(tbu - Ben)
(tbu)
(tbu)
(tbu)
A.M., B.S., H.P., M.N, and W.R.
Mentor: H.D.