Latency and Liquidity Risk

  title={Latency and Liquidity Risk},
  author={�lvaro Cartea and Sebastian Jaimungal and Leandro S'anchez-Betancourt},
  journal={Capital Markets: Market Microstructure eJournal},
  • �?lvaro Cartea, Sebastian Jaimungal, Leandro S'anchez-Betancourt
  • Published 2019
  • Economics
  • Capital Markets: Market Microstructure eJournal
  • Latency (i.e., time delay) in electronic markets affects the efficacy of liquidity taking strategies. During the time liquidity takers process information and send marketable limit orders (MLOs) to the exchange, the limit order book (LOB) might undergo updates, so there is no guarantee that MLOs are filled. We develop a latency-optimal trading strategy that improves the marksmanship of liquidity takers. The interaction between the LOB and MLOs is modelled as a marked point process. Each MLO… CONTINUE READING