High-frequency trading in a limit order book

The paper studies the optimal submission of bid and ask orders in a limit order book from the market maker’s side, treating inventory risk rather than asymmetric-information risk as the binding constraint. The result has two parts that later work quotes constantly: a reservation price that skews away from the mid as inventory accumulates, and an optimal spread placed around it.

No code was released by the authors — everything runnable descends from later implementations. Hummingbot ships the model as a first-class strategy under hummingbot/strategy/avellaneda_market_making/, with its own test suite, computing the reservation price and optimal spread directly from the paper’s algebra. Its source comments also record where the maintainers deliberately depart from the infinite-horizon equations, noting that “the equations in the paper for this contain a few mistakes — the units don’t align with the rest of the paper”, so read it as an adaptation rather than a transcription.

The article is paywalled at Taylor & Francis; the DOI above is the canonical link. A freely reachable PDF sits on the first author’s NYU page, but it is a redistributed publisher copy carrying a library download watermark, not an open-access version. Citation counts differ by source: Semantic Scholar records 566, Crossref 373, the latter counting only DOI-registered references.