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Modelling and Simulation in Life and Material Sciences

Continuous double auction

Tijana Radivojevic

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We introduced a stylized phenomenological model for the continuous double auction [1]. The model reproduces the behaviour of zero-intelligence agent. For what concerns the number of orders, the model is equivalent to two independent M/M/1 queues.

Our simulations present the essential double auction trading mechanism in the case of stability, i.e. when the load of the system is less then 1 (video 1) and in the case when there is no stability, i.e. the load is greater then 1 (video 2).

The upper part presents the dynamics of the order book - arrivals of limit orders at a certain price level and their departures, corresponding to the arrivals of market orders.

Ask and bid orders are differentiated in such a way that they are shown above and below the value zero, respectively.

The resulting price time series is presented in the second plot (below the first one).

[1] Radivojevic T., Anselmi J., Scalas E.,A stylized model for the continuous double auction, Lecture Notes in Economics and Mathematical Systems, to appear

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Eusko Jaurlaritza - Gobierno Vasco ikerbasque - Basque Foundation for Science Bizkaia xede. Bizkaiko Foru Aldundia innobasque - Agencia vasca de la innovación Universidad del PaÌs Vasco (UPV/EHU)