Diffusion Limit of Poisson Limit-Order Book Models
Christopher Almost, John Lehoczky, Steven Shreve, Xiaofeng Yu
TL;DR
This paper provides detailed proofs and technical analysis for the diffusion limit of Poisson limit-order book models, complementing prior work that introduced the rationale and specific model results.
Contribution
It offers rigorous mathematical proofs and technical details for the diffusion limit analysis of Poisson limit-order book models, expanding on previous conceptual work.
Findings
Rigorous proof of diffusion limit for Poisson limit-order models
Technical validation of prior model results
Enhanced understanding of order book dynamics
Abstract
This ia a companion paper to Almost, Lehoczky, Shreve & Yu \cite{ALSY}, where the rationale for studying the diffusion limit of Poisson limit-order book models is explained and the results of a particular "representative" model are detailed. This paper contains the proofs and technical details cited in that work.
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Taxonomy
TopicsComplex Systems and Time Series Analysis · Theoretical and Computational Physics · Financial Risk and Volatility Modeling