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Problem 309 of 333HardStochastic ProcessesP309
How many orders are resting at the level
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 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 ?
(b) At 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?
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