Problem bank

Problem 309 of 333HardStochastic ProcessesP309

How many orders are resting at the level

  1. Limit orders arrive at one price level as a Poisson process at rate 5 per minute. Each order rests until it is cancelled, and the resting times are independent Exponential\text{Exponential} with mean 2 minutes, independent of the arrivals. Ignore fills. The level is empty at time 0.

    (a) What is the distribution of the number of orders resting at time tt?

    (b) At t=2t = 2 minutes, what are the mean number of resting orders and the probability that the level is empty?

    (c) What is the long-run distribution?

    (d) Suppose instead every order rests for exactly 2 minutes. How do the answers to (b) and (c) change?