T. Preis et al 2006 Europhys. Lett. 75 510 doi:10.1209/epl/i2006-10139-0
T. Preis, S. Golke, W. Paul and J. J. Schneider
Show affiliationsWe introduce a simple model for simulating financial markets, based on an order book, in which several agents trade one asset at a virtual exchange continuously. For a stationary market the structure of the model, the order flow rates of the different kinds of order types and the used price time priority matching algorithm produce only a diffusive price behavior. We show that a market trend, i.e. an asymmetric order flow of any type, leads to a non-trivial Hurst exponent for the price development, but not to "fat-tailed" return distributions. When one additionally couples the order entry depth to the prevailing trend, also the stylized empirical fact of "fat tails" can be reproduced by our Order Book Model.
89.65.Gh Economics; econophysics, financial markets, business and management
Issue 3 (August 2006)
Received 16 May 2006, accepted for publication 20 June 2006
Published 5 July 2006
T. Preis et al 2006 Europhys. Lett. 75 510
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