Interview Question: Time to Execution

Sample Question #114 (econometric/statistical case question)

We’re interested in modeling how limit orders get executed. What are some of the econometric or statistical models you can suggest to us?

(Comment: this is an open-ended case question; the interviewer is interested in finding out whether you’re just a bookworm, or know how to apply book knowledge to real-world modeling problems)

(Comment 2: of course, in order to answer this question, you should know what limit orders are; if you don’t, follow the advice in my book!)

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One Response to Interview Question: Time to Execution

  1. Brett says:

    ANSWER
     
    A limit order is entered with a specific price at which the order is sent to execution. Before the limit price is reached, the limit order sits on the "order book" and waits for that price to arrive.
     
    This "waiting-for-event-arrival" nature of limit orders can be best modeled using a statistical technique called survival analysis, which only recently has been introduced into financial econometrics. 

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