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Low-Latency Architecture for Order Book Building
Závodník, Tomáš ; Kořenek, Jan (referee) ; Dvořák, Milan (advisor)
Information technology forms an important part of the world and algorithmic trading has already become a common concept among traders. The High Frequency Trading (HFT) requires use of special hardware accelerators which are able to provide input response with sufficiently low latency. This master's thesis is focused on design and implementation of an architecture for order book building, which represents an essential part of HFT solutions targeted on financial exchanges. The goal is to use the FPGA technology to process information about an exchange's state with latency so low that the resulting solution is effectively usable in practice. The resulting architecture combines hardware and software in conjunction with fast lookup algorithms to achieve maximum performance without affecting the function or integrity of the order book.
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Order book dynamics
Peržina, Vít ; Swart, Jan (advisor) ; Večeř, Jan (referee)
Main goal of this thesis is improvement of an order book model so that it behaved more realistically, based on a model developed by J. Plačková in her diploma thesis in 2011. We consider this simple model for evolution of order book in which limit orders of unit size arrive according to independent Poisson processes. Frequency of buy limit orders below resp. sell limit orders above a given price level is described by demand and supply functions. Buy (resp. sell) limit orders that arrive with price above (resp. below) the current ask (resp. bid) price are converted into market orders and cancellation of orders is not allowed. We extend this model by introducing market makers who place at the same time one buy and one sell limit order with current bid and ask prices. We show how introducing market makers reduces the spread that in the original model was unrealistically large and also show a method of calculating the precise rate of market makers needed to reduce the spread to zero. 1
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Volatility bursts and order book dynamics
Plačková, Jana ; Swart, Jan (advisor) ; Lachout, Petr (referee)
Title: Volatility bursts and order book dynamics Author: Jana Plačková Department: Department of Probability and Mathematical Statistics Supervisor: Dr. Jan M. Swart Supervisor's e-mail address: swart@utia.cas.cz Abstract: The presented paper studies the dynamics of supply and demand through the electronic order book. We describe and define the basic rules of the order book and its dynamics. We also define limit and market orders and describe the differences between them and how they influenced the evolution of ask, bid price and spread. Next part of the paper is dedicated to the de- scription and definition of volatility and its basic models. The brief overview about volatility clustering and its modeling by economists and physicists can be found in the following part. In the last part we introduce a simple model of order book in which we observe ask, bid price and spread. Then we study the empirical distribution of spread and try to find its probability distribu- tion. The volatility clustering is then observed through the relative returns of spread. In the last part we introduce some possible improvement of the model. Keywords: volatility clustering, order book, limit orders, market orders 1
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Statistical inference of the Modified Smith?s model
Rušin, Michal ; Šmíd, Martin (advisor) ; Hlubinka, Daniel (referee)
The present work discuss the continuous double auction mechanisms and the order book models. After a brief introduction to selected models, a general model of the the continuous double auction from the thesis title is described. Further, a structure of british market data is given as well as an approach to them. Based on these data the validity of Smith Farmer's model and Cont Stoikov's model is tested in the context of general model by linear regression. Finally, based on the previous results, the own order book model is suggested and its validity tested.
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Market Making as a trading strategy
Bartík, Jan ; Stádník, Bohumil (advisor) ; Diviš, Martin (referee)
This diploma thesis deals with the market-making strategy's profitability analysis, tested on simulation of central order book. The theoretical part describes how the market maker quotes the price of supply and demand and mathematically proves under which circumstances this strategy is profitable. The practical part introduces a simulation of the central order book. The advantage of simulating the entire order book is that we have information about the number of market participants and quotes at any given time. It also introduces a fictitious market maker quoting the price of supply and demand at any given moment, the price being determined by the price of the previous time step. The order book is simulated in three different settings - random walk, mean-reversion and leptokurtic distribution, and it is shown that the expected profitability of the market-maker strategy is positive in all three cases.
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Volatility bursts and order book dynamics
Plačková, Jana ; Swart, Jan (advisor) ; Lachout, Petr (referee)
Title: Volatility bursts and order book dynamics Author: Jana Plačková Department: Department of Probability and Mathematical Statistics Supervisor: Dr. Jan M. Swart Supervisor's e-mail address: swart@utia.cas.cz Abstract: The presented paper studies the dynamics of supply and demand through the electronic order book. We describe and define the basic rules of the order book and its dynamics. We also define limit and market orders and describe the differences between them and how they influenced the evolution of ask, bid price and spread. Next part of the paper is dedicated to the de- scription and definition of volatility and its basic models. The brief overview about volatility clustering and its modeling by economists and physicists can be found in the following part. In the last part we introduce a simple model of order book in which we observe ask, bid price and spread. Then we study the empirical distribution of spread and try to find its probability distribu- tion. The volatility clustering is then observed through the relative returns of spread. In the last part we introduce some possible improvement of the model. Keywords: volatility clustering, order book, limit orders, market orders 1
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Statistical inference of the Modified Smith?s model
Rušin, Michal ; Šmíd, Martin (advisor) ; Hlubinka, Daniel (referee)
The present work discuss the continuous double auction mechanisms and the order book models. After a brief introduction to selected models, a general model of the the continuous double auction from the thesis title is described. Further, a structure of british market data is given as well as an approach to them. Based on these data the validity of Smith Farmer's model and Cont Stoikov's model is tested in the context of general model by linear regression. Finally, based on the previous results, the own order book model is suggested and its validity tested.
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Order book dynamics
Peržina, Vít ; Swart, Jan (advisor) ; Večeř, Jan (referee)
Main goal of this thesis is improvement of an order book model so that it behaved more realistically, based on a model developed by J. Plačková in her diploma thesis in 2011. We consider this simple model for evolution of order book in which limit orders of unit size arrive according to independent Poisson processes. Frequency of buy limit orders below resp. sell limit orders above a given price level is described by demand and supply functions. Buy (resp. sell) limit orders that arrive with price above (resp. below) the current ask (resp. bid) price are converted into market orders and cancellation of orders is not allowed. We extend this model by introducing market makers who place at the same time one buy and one sell limit order with current bid and ask prices. We show how introducing market makers reduces the spread that in the original model was unrealistically large and also show a method of calculating the precise rate of market makers needed to reduce the spread to zero. 1
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