Limit Order Books
Martin D. Gould, Mason A. Porter, Stacy Williams, Mark, McDonald, Daniel J. Fenn, Sam D. Howison

TL;DR
This survey reviews empirical and theoretical research on limit order books, highlighting insights, modeling challenges, and unresolved questions about their mechanisms in financial markets.
Contribution
It provides a comprehensive overview of existing LOB models, critiques their limitations, and identifies key open research questions in the field.
Findings
Many models poorly match real LOB data
Several empirical facts remain unexplained by current models
Key unresolved questions about LOB dynamics
Abstract
Limit order books (LOBs) match buyers and sellers in more than half of the world's financial markets. This survey highlights the insights that have emerged from the wealth of empirical and theoretical studies of LOBs. We examine the findings reported by statistical analyses of historical LOB data and discuss how several LOB models provide insight into certain aspects of the mechanism. We also illustrate that many such models poorly resemble real LOBs and that several well-established empirical facts have yet to be reproduced satisfactorily. Finally, we identify several key unresolved questions about LOBs.
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Taxonomy
TopicsFinancial Markets and Investment Strategies · Auction Theory and Applications · Game Theory and Voting Systems
