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Quantitative Finance · Glossary

What is Queue-reactive model?

Definition 5.1 Market Making and High-Frequency Trading · Chapter 5 — Queue-Reactive Models and Large-Tick Assets

A queue-reactive model describes each best queue of a book as a birth–death process whose rates depend on the queue’s current size qq: limit orders join its back at rate λL(q)\lambda^L(q), cancellations remove resting orders at rate λC(q)\lambda^C(q), market orders remove orders from its front at rate λM(q)\lambda^M(q). When a queue empties the price moves by one tick and new queues are drawn from a regeneration distribution.

Queue-reactive intensities of the best queues of the simulated stock, pooled over bid and ask, by the queue’s size just before each event; one simulated hour. Data: firm.qreactive.estimate on firm.tape.
Figure 5.1. Queue-reactive intensities of the best queues of the simulated stock, pooled over bid and ask, by the queue’s size just before each event; one simulated hour. Data: firm.qreactive.estimate on firm.tape.
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