Worcester Polytechnic Institute Electronic Theses and Dissertations Collection

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Author NameLi, Yi
TitleLiquidity Modeling Using Order Book Data
DepartmentMathematical Sciences
  • Marcel Y. Blais, Advisor
  • Bogdan M. Vernescu, Department Head
  • Keywords
  • Limit Order Book
  • Mathematical Finance
  • Liquidity
  • Date of Presentation/Defense2009-08-31
    Availability unrestricted


    On a stock exchange, trading activity has an impact on stock prices. Market agents place limit orders, which come in the form of bids and asks. These orders wait in the market to be executed when another agent agrees to fulfill the transaction. We examine an "inventory-based" quoting strategy model developed by Marco Avellaneda and Sasha Stoikov. We expand on their work by developing a method to calibrate the model to market data using limit order data provided by Morgan Stanley. We consider solving a least squares problem which fits the model to the data using a sensitivity parameter.

  • Yi_Li_final.pdf

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