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Conditional Generators for Limit Order Book Environments: Explainability, Challenges, and Robustness

Author

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  • Andrea Coletta
  • Joseph Jerome
  • Rahul Savani
  • Svitlana Vyetrenko

Abstract

Limit order books are a fundamental and widespread market mechanism. This paper investigates the use of conditional generative models for order book simulation. For developing a trading agent, this approach has drawn recent attention as an alternative to traditional backtesting due to its ability to react to the presence of the trading agent. Using a state-of-the-art CGAN (from Coletta et al. (2022)), we explore its dependence upon input features, which highlights both strengths and weaknesses. To do this, we use "adversarial attacks" on the model's features and its mechanism. We then show how these insights can be used to improve the CGAN, both in terms of its realism and robustness. We finish by laying out a roadmap for future work.

Suggested Citation

  • Andrea Coletta & Joseph Jerome & Rahul Savani & Svitlana Vyetrenko, 2023. "Conditional Generators for Limit Order Book Environments: Explainability, Challenges, and Robustness," Papers 2306.12806, arXiv.org.
    • Handle: RePEc:arx:papers:2306.12806
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    File URL: http://arxiv.org/pdf/2306.12806
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    References listed on IDEAS

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    11. Andrea Coletta & Matteo Prata & Michele Conti & Emanuele Mercanti & Novella Bartolini & Aymeric Moulin & Svitlana Vyetrenko & Tucker Balch, 2021. "Towards Realistic Market Simulations: a Generative Adversarial Networks Approach," Papers 2110.13287, arXiv.org.
    12. repec:hal:spmain:info:hdl:2441/13thfd12aa8rmplfudlgvgahff is not listed on IDEAS
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    Cited by:

    1. Hamza Bodor & Laurent Carlier, 2024. "A Novel Approach to Queue-Reactive Models: The Importance of Order Sizes," Papers 2405.18594, arXiv.org.
    2. Vamsi K. Potluru & Daniel Borrajo & Andrea Coletta & Niccol`o Dalmasso & Yousef El-Laham & Elizabeth Fons & Mohsen Ghassemi & Sriram Gopalakrishnan & Vikesh Gosai & Eleonora Kreav{c}i'c & Ganapathy Ma, 2023. "Synthetic Data Applications in Finance," Papers 2401.00081, arXiv.org, revised Mar 2024.
    3. Yu-Hao Huang & Chang Xu & Yang Liu & Weiqing Liu & Wu-Jun Li & Jiang Bian, 2024. "Controllable Financial Market Generation with Diffusion Guided Meta Agent," Papers 2408.12991, arXiv.org, revised Sep 2024.
    4. Jian Guo & Heung-Yeung Shum, 2024. "Large Investment Model," Papers 2408.10255, arXiv.org, revised Aug 2024.
    5. Song Wei & Andrea Coletta & Svitlana Vyetrenko & Tucker Balch, 2023. "INTAGS: Interactive Agent-Guided Simulation," Papers 2309.01784, arXiv.org, revised Nov 2023.

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