Faculty Advisor

Bogdan M. Vernescu

Faculty Advisor

Marcel Y. Blais

Abstract

"On a stock exchange, trading activity has an impact on stock prices. Market agents place limit orders, which come in the form of bids and asks. These orders wait in the market to be executed when another agent agrees to fulfill the transaction. We examine an "inventory-based" quoting strategy model developed by Marco Avellaneda and Sasha Stoikov. We expand on their work by developing a method to calibrate the model to market data using limit order data provided by Morgan Stanley. We consider solving a least squares problem which fits the model to the data using a sensitivity parameter."

Publisher

Worcester Polytechnic Institute

Degree Name

MS

Department

Mathematical Sciences

Project Type

Thesis

Date Accepted

2009-08-31

Accessibility

Unrestricted

Subjects

Limit Order Book, Mathematical Finance, Liquidity

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