Optimal Placement in a Limit Order Book

Xin Guo
Algorithmic trading refers to the automatic and rapid trading of large quantities with orders specified and implemented by an algorithm. Roughly speaking, algorithmic trading is based on two different time scales: the daily or weekly scale, and a smaller (ten to hundred seconds) time scale. These two time scales essentially reflect the two steps by which the traders slice and place orders. The first step is to optimally slice big orders into smaller ones on a daily basis with the goal to minimize the price impact and/or to maximize the expected utility; the second step is to optimally place the orders within seconds. The former is the well-known optimal execution problem and the latter is the much less-studied optimal placement problem. This paper reviews several simple models and approaches for the optimal placement problem. Several most relevant statistical issues are presented, together with a brief discussion on the key differences between the system of limit order book and the multiclass queues with reneging.

Небольшой, но интересный обзор статей по оптимальному размещению ордеров.