A multilayer model of order book dynamics

Multilayer networks give us the chance to represent the multiplicity of relations among financial operators. In particular, such a framework provides the natural environment for depicting both the informative diffusion and the transactions phase in separate, though interacting, network levels. In this paper, we present a two-layer order book model; this implements information spreading on the first layer, which exhibits self- organized criticality (SOC) to describe herding behavior among traders, and financial trading on the second one. Like its single-layer version (see, for example, Biondo et al 2015), this model is also based on the relevant role played by individual imitation in determining trading decisions; but the introduction of the order book layer now makes the price-formation mechanism much more realistic. Despite the simplifying assumptions in the trading dynamics, the results of numerical simulations show fat- tailed distributions of financial returns and other interesting features typical of real financial markets.