Event-Time Anchor Selection for Multi-Contract Quoting

ArXiv ID: 2507.05749 “View on arXiv”

Authors: Aditya Nittur Anantha, Shashi Jain, Shivam Goyal, Dhruv Misra

Abstract

When quoting across multiple contracts, the sequence of execution can be a key driver of implementation shortfall relative to the target spread~\cite{“bergault2022multi”}. We model the short-horizon execution risk from such quoting as variations in transaction prices between the initiation of the first leg and the completion of the position. Our quoting policy anchors the spread by designating one contract ex ante as a \emph{“reference contract”}. Reducing execution risk requires a predictive criterion for selecting that contract whose price is most stable over the execution interval. This paper develops a diagnostic framework for reference-contract selection that evaluates this stability by contrasting order-flow Hawkes forecasts with a Composite Liquidity Factor (CLF) of instantaneous limit order book (LOB) shape. We illustrate the framework on tick-by-tick data for a pair of NIFTY futures contracts. The results suggest that event-history and LOB-state signals offer complementary views of short-horizon execution risk for reference-contract selection.

Keywords: Multi-contract quoting, Hawkes processes, Limit order book shape, Execution risk, Implementation shortfall, Futures

Complexity vs Empirical Score

• Math Complexity: 7.0/10
• Empirical Rigor: 7.0/10
• Quadrant: Holy Grail
• Why: The paper employs advanced mathematical models like multivariate Hawkes processes and detailed statistical forecasting for execution risk, and it is heavily data-driven with a backtest-ready design using tick-by-tick NIFTY futures data and a walk-forward out-of-sample evaluation framework.

  flowchart TD
    A["Research Goal"] --> B["Data Input<br>NIFTY Futures Tick Data"]
    B --> C{"Diagnostic Framework"}
    C --> D["Model Execution Risk<br>Hawkes Process Forecast<br>Order Flow Dynamics"]
    C --> E["Metric Liquidity Risk<br>Composite Liquidity Factor<br>LOB Shape Analysis"]
    D --> F["Comparison & Selection<br>Contrast Signals for<br>Reference Contract Stability"]
    E --> F
    F --> G["Key Finding"]
    G --> H["Event-history & LOB signals<br>are complementary for<br>short-horizon execution risk"]