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Max Oliveberg: Optimal Order Placement Using Markov Models of Limit Order Books

Master thesis final presentation

Time: Fri 2023-06-09 15.00 - 15.30

Location: KTH Lindstedsvägen 25, Room 3721

Respondent: Max Oliveberg

Supervisor: Jonas Kiessling (Qubos Systematic AB), Jakob Stigenberg (Qubos Systematic AB) and Anders Szepessy (KTH)

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 We study optimal order placement in a limit order book. By modelling the limit order book dynamics as a Markov chain, we can frame the purchase of a single share as a Markov Decision Process. Within the framework of the model, we can estimate optimal decision policies numerically. The trade rate is varied using a running cost control variable. The optimal policy is found to result in a lower cost of trading as a function of the trade rate compared to a market order only strategy.