Abstract
We consider a simplified model of the continuous double auction where prices are integers varying from 1 to N with limit orders and market orders, but quantity per order limited to a single share. For this model, the order process is equivalent to two M∕M∕1 queues. We study the behavior of the auction in the low-traffic limit where limit orders are immediately matched by market orders. In this limit, the distribution of prices can be computed exactly and gives a reasonable approximation of the price distribution when the ratio between the rate of order arrivals and the rate of order executions is below 1∕2. This is further confirmed by the analysis of the first-passage time in 1 or N.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: Physica A: Statistical Mechanics and its Applications
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
