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Order Execution Probability and Order Queue in Limit Order Markets

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Abstract

The shaping of a limit order book illustrates the dynamics of the trading process, the changing pattern of the execution probability of limit orders therefore plays an important role. This paper presents a computable execution probability model for limit order market, as well as a numerical example that intuitively characterizes the changing pattern of the execution probability. The common effects of the lengths of both buy and sell queues on the execution probability are explored. In the limit book, the cumulative probability of limit orders is introduced as a crucial index of market depth to describe the shaping process which brings new insights into the structure of the order placement decision.

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Author information

Authors and Affiliations

  1. School of Economics and Management, Beijing University of Chemical Technology, Beijing, 100029, China

    Qiang Zhang & Chao Wang

  2. School of Economics and Management, Beihang University, Beijing, 100191, China

    Shancun Liu

  3. Unversity College London, Gower Street, London, WC1E 6BT, UK

    Yaodong Yang

Authors
  1. Qiang Zhang
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  2. Chao Wang
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  3. Shancun Liu
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  4. Yaodong Yang
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Corresponding author

Correspondence to Shancun Liu.

Additional information

This research was supported by the National Natural Science Foundation of China under Grant Nos. 71371024 and 71771008, the Funds for the First-Class Discipline Construction under Grant No. XK1802-5, and the Fundamental Research Funds for the Central University under Grant Nos. PTRW1808 and YWF-19-BJ-W-45.

This paper was recommended for publication by Editor WANG Shouyang.

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Zhang, Q., Wang, C., Liu, S. et al. Order Execution Probability and Order Queue in Limit Order Markets. J Syst Sci Complex 33, 1545–1557 (2020). https://doi.org/10.1007/s11424-020-9100-5

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  • DOI: https://doi.org/10.1007/s11424-020-9100-5

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