Reading the Market’s Signals: Predicting Liquidity Stress in Order Books
![During a build-up regime, gradual erosion of depth ([latex] -{14}.3 \pm 2.1 [/latex] units) and mild spread widening ([latex] +8.7 \pm 1.4 [/latex] units) consistently precede the onset of stress, explaining why flow-based detectors fail to capture early indications of instability due to persistent imbalance within the stable regime distribution.](https://arxiv.org/html/2604.20949v1/x1.png)
New research reveals a method for proactively identifying subtle shifts in market behavior that precede significant liquidity drops in limit order books.
![During a build-up regime, gradual erosion of depth ([latex] -{14}.3 \pm 2.1 [/latex] units) and mild spread widening ([latex] +8.7 \pm 1.4 [/latex] units) consistently precede the onset of stress, explaining why flow-based detectors fail to capture early indications of instability due to persistent imbalance within the stable regime distribution.](https://arxiv.org/html/2604.20949v1/x1.png)
New research reveals a method for proactively identifying subtle shifts in market behavior that precede significant liquidity drops in limit order books.
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