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Stochastic Modelling of Big Data in Finance

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  • Anatoliy Swishchuk

    (University of Calgary)

Abstract

We present a new approach to study big data in finance (specifically, in limit order books), based on stochastic modelling of price changes associated with high-frequency and algorithmic trading. We introduce a big data in finance, namely, limit order books (LOB), and describes them by Lobster data-academic data for studying LOB. Numerical results, associated with Lobster and other data, are presented, and explanation and justification of our method of studying of big data in finance are considered. We also describe various stochastic models for mid-price changes in the market, and explain how to use these models in practice, highlighting the methodological aspects of using the models.

Suggested Citation

  • Anatoliy Swishchuk, 2020. "Stochastic Modelling of Big Data in Finance," Methodology and Computing in Applied Probability, Springer, vol. 22(4), pages 1613-1630, December.
    • Handle: RePEc:spr:metcap:v:22:y:2020:i:4:d:10.1007_s11009-020-09826-6
    DOI: 10.1007/s11009-020-09826-6
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    References listed on IDEAS

    as
    1. Anatoliy Swishchuk & Aiden Huffman, 2018. "General Compound Hawkes Processes in Limit Order Books," Papers 1812.02298, arXiv.org.
    2. Martin D. Gould & Mason A. Porter & Stacy Williams & Mark McDonald & Daniel J. Fenn & Sam D. Howison, 2010. "Limit Order Books," Papers 1012.0349, arXiv.org, revised Apr 2013.
    3. Rama Cont & Sasha Stoikov & Rishi Talreja, 2010. "A Stochastic Model for Order Book Dynamics," Operations Research, INFORMS, vol. 58(3), pages 549-563, June.
    4. Martin D. Gould & Mason A. Porter & Stacy Williams & Mark McDonald & Daniel J. Fenn & Sam D. Howison, 2013. "Limit order books," Quantitative Finance, Taylor & Francis Journals, vol. 13(11), pages 1709-1742, November.
    5. Anatoliy Swishchuk & Tyler Hofmeister & Katharina Cera & Julia Schmidt, 2017. "General Semi-Markov Model For Limit Order Books," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 20(03), pages 1-21, May.
    6. Marco Avellaneda & Sasha Stoikov, 2008. "High-frequency trading in a limit order book," Quantitative Finance, Taylor & Francis Journals, vol. 8(3), pages 217-224.
    7. Rama Cont & Adrien de Larrard, 2013. "Price Dynamics in a Markovian Limit Order Market," Post-Print hal-00552252, HAL.
    8. Anatoliy Swishchuk, 2017. "Risk Model Based on General Compound Hawkes Process," Papers 1706.09038, arXiv.org.
    Full references (including those not matched with items on IDEAS)

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