dorsal/arxiv
View SchemaLimit order placement as an utility maximization problem and the origin of power law distribution of limit order prices
| Authors | Fabrizio Lillo |
|---|---|
| Categories | |
| ArXiv ID | physics/0612016 |
| URL | https://arxiv.org/abs/physics/0612016 |
| DOI | 10.1140/epjb/e2007-00067-9 |
Abstract
I consider the problem of the optimal limit order price of a financial asset in the framework of the maximization of the utility function of the investor. The analytical solution of the problem gives insight on the origin of the recently empirically observed power law distribution of limit order prices. In the framework of the model, the most likely proximate cause of this power law is a power law heterogeneity of traders' investment time horizons .
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"abstract": "I consider the problem of the optimal limit order price of a financial asset\nin the framework of the maximization of the utility function of the investor.\nThe analytical solution of the problem gives insight on the origin of the\nrecently empirically observed power law distribution of limit order prices. In\nthe framework of the model, the most likely proximate cause of this power law\nis a power law heterogeneity of traders\u0027 investment time horizons .",
"arxiv_id": "physics/0612016",
"authors": [
"Fabrizio Lillo"
],
"categories": [
"physics.soc-ph",
"q-fin.TR"
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"doi": "10.1140/epjb/e2007-00067-9",
"title": "Limit order placement as an utility maximization problem and the origin of power law distribution of limit order prices",
"url": "https://arxiv.org/abs/physics/0612016"
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