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arXiv · 1910.09202

Conservation Laws in a Limit Order Book

Jan Rosenzweig
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Abstract

We present a class of macroscopic models of the Limit Order Book to simulate the aggregate behaviour of market makers in response to trading flows. The resulting models are solved numerically and asymptotically, and a class of similarity solutions linked to order book formation and recovery is explored. The main result is that order book recovery from aggressive liquidity taking follows a simple $t^{1/3}$ scaling law.

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Jan Rosenzweig. 2019-10-21. Conservation Laws in a Limit Order Book. https://arxiv.org/abs/1910.09202

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