Determining the price at which to conduct a trade is an age-old problem. The ﬁrst (albeit primitive) pricing mechanism dates back to the Neolithic era, when people met in physical proximity in order to agree upon mutually beneﬁcial exchanges of goods and services, and over time increasingly complex mechanisms have played a role in determining prices. In the highly competitive and relentlessly fast-paced markets of today’s ﬁnancial world, it is the limit order book that matches buyers and sellers to trade at an agreed price in more than half of the world’s markets. In this talk I will describe the limit order book trade-matching mechanism, and explain how the extra flexibility it provides has vastly impacted the problem of how a market participant should optimally behave in a given set of circumstances.
- Junior Applied Mathematics Seminar