I am trying to model the number of order that come at a distance d from the top of the book on either side, both bid and ask.

I was wondering what is a good way to model orders which improve the best bid and best offer? Do people use a negative number or use absolute distance? What are the pros and cons of both?

Has someone worked on this and willing to share a few ideas?

  • $\begingroup$ I think this is an interesting question but I think it could do with some clarification. What have you attempted, can you give an example of the output you want from a model, etc... $\endgroup$ – Attack68 Aug 2 '19 at 6:15
  • $\begingroup$ I am looking to that given a state of the order book, what is the probability of getting a market order. Also, it depends not only on the state of the order book, but also what happened in the recent past (due to vol clustering). I have tried modelling it as poisson process, but ran into a logical issue with orders improving best bid or offer. $\endgroup$ – nimbus3000 Aug 5 '19 at 5:55

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