Recovering power-law distributions of lifetimes of orders both cancelled and executed using an agent-based model containing reservation prices

Abstract

A lifetime of limit order is defined as the elapsed time from appear (submission) to disappear (cancellation or execution). Lifetime is a key of decision-making of traders because traders submit an order based on the trade-off between execution cost (how much price will be executed at) and delay risk (how long does it takes to be executed) and execution lifetime means the waiting time to execution and cancellation lifetime means the limit time of patience. Therefore, recovering power-law distribution of lifetimes of orders by an agent-based model (ABM) is a benchmark of time related decision-making of agents and contributes to constructing more advanced models. In this study, we created an ABM reproducing both of cancellation and execution lifetime distributions by extending our previous ABM doing only the distribution of cancelled orders.