This paper provides a road map for building a contingent claims theory of limit order markets grounded in a simple observation: limit orders are equivalent to a portfolio of cash-or-nothing and asset-or-nothing digital options on market order flow. However, limit orders are not conventional...

This paper builds on the landmark contribution of Glosten (1994) by treating the determination of limit order supply schedules as an exercise in asset pricing theory with the possible sizes of incoming market orders as the value-relevant states of nature, yielding an analogue of the Fundamental...

This paper provides a road map for building a contingent claims theory of limit order markets grounded in a simple observation: limit orders are equivalent to a portfolio of cash-or-nothing and asset-or-nothing digital options on market order flow. However, limit orders are not conventional...

High-frequency traders in financial markets have been making media headlines. As a relatively new phenomenon, much of the discussion is not backed by solid academic research. In this special issue of the Journal of Financial Markets on High-Frequency Trading, we present several research papers...