Correlation emergence in two coupled limit order books in the fluid limit

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dc.contributor.advisorGebbie, Timothy
dc.contributor.authorBauer, Dominic
dc.date.accessioned2024-11-28T08:14:51Z
dc.date.available2024-11-28T08:14:51Z
dc.date.issued2024
dc.date.updated2024-11-27T13:13:10Z
dc.description.abstractWeuse random walks to simulate the fluid limit of two coupled diffusive limit order books to model correlation emergence. The model implements the arrival, cancellation and diffusion of orders coupled by a pairs trader profiting from the mean-reversion between the two order-books in the fluid limit for a Lit order book with vanishing boundary conditions and order volume conservation we are able to demonstrate the recovery of an Epps effect. We show how various stylised facts depend on the model parameters and the numerical scheme and discuss various strengths and weaknesses of the approach. We demonstrate how the Epps effect depends on different choices of time and price discretisation and show how an Epps effect can emerge without recourse to market microstructure effects.
dc.identifier.apacitationBauer, D. (2024). <i>Correlation emergence in two coupled limit order books in the fluid limit</i>. (). ,Faculty of Science ,Department of Statistical Sciences. Retrieved from http://hdl.handle.net/11427/40753en_ZA
dc.identifier.chicagocitationBauer, Dominic. <i>"Correlation emergence in two coupled limit order books in the fluid limit."</i> ., ,Faculty of Science ,Department of Statistical Sciences, 2024. http://hdl.handle.net/11427/40753en_ZA
dc.identifier.citationBauer, D. 2024. Correlation emergence in two coupled limit order books in the fluid limit. . ,Faculty of Science ,Department of Statistical Sciences. http://hdl.handle.net/11427/40753en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Bauer, Dominic AB - Weuse random walks to simulate the fluid limit of two coupled diffusive limit order books to model correlation emergence. The model implements the arrival, cancellation and diffusion of orders coupled by a pairs trader profiting from the mean-reversion between the two order-books in the fluid limit for a Lit order book with vanishing boundary conditions and order volume conservation we are able to demonstrate the recovery of an Epps effect. We show how various stylised facts depend on the model parameters and the numerical scheme and discuss various strengths and weaknesses of the approach. We demonstrate how the Epps effect depends on different choices of time and price discretisation and show how an Epps effect can emerge without recourse to market microstructure effects. DA - 2024 DB - OpenUCT DP - University of Cape Town KW - online learning KW - technical analysis KW - portfolio selection KW - backtesting KW - overf itting KW - in-sample KW - out-of-sample KW - Johannesburg Stock Exchange LK - https://open.uct.ac.za PY - 2024 T1 - Correlation emergence in two coupled limit order books in the fluid limit TI - Correlation emergence in two coupled limit order books in the fluid limit UR - http://hdl.handle.net/11427/40753 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/40753
dc.identifier.vancouvercitationBauer D. Correlation emergence in two coupled limit order books in the fluid limit. []. ,Faculty of Science ,Department of Statistical Sciences, 2024 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/40753en_ZA
dc.language.rfc3066eng
dc.publisher.departmentDepartment of Statistical Sciences
dc.publisher.facultyFaculty of Science
dc.publisher.institutionUniversity of Cape Town
dc.subjectonline learning
dc.subjecttechnical analysis
dc.subjectportfolio selection
dc.subjectbacktesting
dc.subjectoverf itting
dc.subjectin-sample
dc.subjectout-of-sample
dc.subjectJohannesburg Stock Exchange
dc.titleCorrelation emergence in two coupled limit order books in the fluid limit
dc.typeThesis / Dissertation
dc.type.qualificationlevelMasters
dc.type.qualificationlevelMSc
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