fintech-algorithms
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Liquidity-Wall and Concentration Detection

Install and import#

bash
npm install fintech-algorithms
ts
import { liquidityWallConcentration } from "fintech-algorithms/market-microstructure/market-depth-analytics/liquidity-wall-and-concentration-detection";

Signature#

liquidityWallConcentration(levelsRaw, multipleRaw, minShareRaw, thresholdRaw)

Finds levels holding disproportionate size — the 'walls' that act as short-term barriers. Worth treating with suspicion: a wall that disappears the moment price approaches it was never liquidity.

Parameters#

NameTypeNotes
levelsRawLevel[]Book levels to examine.
multipleRawnumberHow many times the average level size counts as a wall.
min: 0
minShareRawnumberMinimum share of total depth a level must hold.
min: 0 · max: 1
thresholdRawnumberConcentration threshold above which the book is flagged as concentrated.
min: 0

Returns#

{ walls, concentration, flagged, … }

Detected walls with the concentration measure for the book as a whole.

Errors#

  • When minShareRaw falls outside 0…1 — throws

Complexity: time O(levels), space O(walls).

Worked example#

executed Captured by running this function on the input its own test provides. Real output of real code — but not asserted against a published figure.

Input#

levelsRaw
[
  {
    "price": 100.01,
    "quantity": 100
  },
  {
    "price": 100.02,
    "quantity": 110
  },
  {
    "price": 100.03,
    "quantity": 450
  }
]

Showing 3 of 5 elements.

multipleRaw
2.5
minShareRaw
0.3
thresholdRaw
0.3

Call#

liquidityWallConcentration(levelsRaw, multipleRaw, minShareRaw, thresholdRaw)

Returns#

object with 13 fields: model, level_count, total_depth, median_level_quantity, hhi_fraction, effective_level_count, largest_level_index, largest_level_share, …

{
  "model": "level-share-concentration-and-wall-screen",
  "level_count": 5,
  "total_depth": 900,
  "median_level_quantity": 120,
  "hhi_fraction": 0.3128395061728395,
  "effective_level_count": 3.196527229676401,
  "largest_level_index": 2,
  "largest_level_share": 0.5,
  "walls": [
    {
      "level_index": 2,
      "price": 100.03,
      "quantity": 450,
      "depth_share": 0.5,
      "median_multiple": 3.75
    }
  ],
  "wall_multiple": 2.5,
  "minimum_share": 0.3,
  "concentration_threshold": 0.3,
  "state": "wall-detected"
}

Other exports#

This module also exports cumulativeDepth, topNDepthImbalance, depthAtDistanceProfile, expectedFillPrice, sweepCostAndSlippage, depthDepletionReplenishment, marketDepthHeatmap, calculate. Every module additionally exports run as an alias of its primary function, and a meta object carrying its catalog id, domain, family, shape and article URL.

Diagrams#

Liquidity-Wall and Concentration Detection — system map

Calculation flow#

Liquidity-Wall and Concentration Detection calculation flow 
flowchart LR
    S1["Validate one ordered book side"]
    S2["Normalize level quantities into shares"]
    S3["Sum squared shares"]
    S4["Calculate median multiples"]
    S5["Flag only levels passing both thresholds and classify "]
    S1 --> S2
    S2 --> S3
    S3 --> S4
    S4 --> S5
    S5 --> D{"both wall thresholds and the separate HHI state threshold"}
    D --> O["hhi_fraction + diagnostics"]
    O --> A["Audit: Fractional HHI is in 1L1 for L positive levels"]

How it works#

This page states the contract — how to call it correctly. The article explains the concept: why it works, and where it breaks.

Read the article →

References#

The rest of the Market-Depth Analytics family#