Handbook of Financial Intermediation and Banking

CHAPTER 3 Limit Order Markets: A Survey

Christine A. Parlour

University of California Berkeley

Duane J. Seppi

Carnegie Mellon University

1. Introduction

2. Modeling Limit Orders

2.1. Static Equilibrium Models

2.2. Equilibrium Models with Static Order Choice and a Terminal Penalty

2.3. Dynamic Optimal Control Models for Single Agents

2.4. Multiperiod Equilibrium Models

2.5. Limit Orders and Private Information

3. Market Design

3.1. Competition and Limit Order Markets

3.2. Imperfect Competition

3.3. Dealer Markets

3.4. Welfare

3.5. Robustness

3.6. Transparency

4. Questions for Future Research

References

We thank the authors of the research reviewed here for their insights into the microstructure of limit order markets and apologize for any ...