Title Discrete q-exponential limit order cancellation time distribution /
Authors Gontis, Vygintas
DOI 10.3390/fractalfract7080581
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Is Part of Fractal and fractional.. Basel : MDPI. 2023, vol. 7, iss. 8, art. no. 581, p. [1-13].. eISSN 2504-3110
Keywords [eng] time series and signal analysis ; discrete stochastic dynamics ; scaling in socio-economic systems ; fractional dynamics ; quantitative finance
Abstract [eng] Modeling financial markets based on empirical data poses challenges in selecting the most appropriate models. Despite the abundance of empirical data available, researchers often face difficulties in identifying the best fitting model. Long-range memory and self-similarity estimators, commonly used for this purpose, can yield inconsistent parameter values, as they are tailored to specific time series models. In our previous work, we explored order disbalance time series from the broader perspective of fractional L’evy stable motion, revealing a stable anti-correlation in the financial market order flow. However, a more detailed analysis of empirical data indicates the need for a more specific order flow model that incorporates the power-law distribution of limit order cancellation times. When considering a series in event time, the limit order cancellation times follow a discrete probability mass function derived from the Tsallis q-exponential distribution. The combination of power-law distributions for limit order volumes and cancellation times introduces a novel approach to modeling order disbalance in the financial markets. Moreover, this proposed model has the potential to serve as an example for modeling opinion dynamics in social systems. By tailoring the model to incorporate the unique statistical properties of financial market data, we can improve the accuracy of our predictions and gain deeper insights into the dynamics of these complex systems.
Published Basel : MDPI
Type Journal article
Language English
Publication date 2023
CC license CC license description