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Limit order market analysis and modelling: on an universal cause for over-diffusive prices

By Damien Challet and Robin Stinchcombe

Abstract

We briefly review data analysis of the Island order book, part of NASDAQ, which suggests a framework to which all limit order markets should comply. Using a simple exclusion particle model, we argue that short-time price over-diffusion in limit order markets is due to the non-equilibrium of order placement, cancellation and execution rates, which is an inherent feature of real limit order markets.

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