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Stochastic Price Dynamics in Response to Order Flow Imbalance: Evidence from CSI 300 Index Futures
Chen Hu, Kouxiao Zhang
https://arxiv.org/abs/2505.17388 …

Stochastic Price Dynamics in Response to Order Flow Imbalance: Evidence from CSI 300 Index Futures
We conduct modeling of the price dynamics following order flow imbalance in market microstructure and apply the model to the analysis of Chinese CSI 300 Index Futures. There are three findings. The first is that the order flow imbalance is analogous to a shock to the market. Unlike the common practice of using Hawkes processes, we model the impact of order flow imbalance as an Ornstein-Uhlenbeck process with memory and mean-reverting characteristics driven by a jump-type Lévy process. Motivate…

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