Mean-field approximation for a limit order driven market model

Abstract

A mean-field variant of the model of limit order driven market introduced recently by Maslov is formulated and solved. The agents do not have any strategies and the memory of the system is kept within the order book. We show that the evolution of the order book is governed by a matrix multiplicative process. The resulting stationary distribution of step-to-step price changes is calculated. It exhibits a power-law tail with exponent 2. We obtain also the price autocorrelation function, which agrees qualitatively with the experimentally observed negative autocorrelation for short times.