Depth-Weighted Midprice

Install and import#

npm install fintech-algorithms

import { depthWeightedMidprice } from "fintech-algorithms/market-microstructure/order-book-dynamics/depth-weighted-midprice";

Signature#

depthWeightedMidprice(bidPrices, bidSizes, askPrices, askSizes)

A midpoint weighted by depth across several levels rather than the naive average of best bid and ask. Less prone to jumping when a single small order sits at the touch.

Parameters#

Returns#

{ midprice, simple_midpoint, weighted_bid, weighted_ask, … }

The depth-weighted midpoint alongside the naive one, so the difference is visible.

Errors#

• When total depth on either side is zero — throws

Complexity: time O(levels), space O(1).

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#

[99.99, 99.98, 99.97]

[500, 1000, 1500]

[100.01, 100.02, 100.03]

[300, 700, 2000]

Call#

depthWeightedMidprice(bidPrices, bidSizes, askPrices, askSizes)

Returns#

object with 13 fields: model, level_count, bid_level_count, ask_level_count, top_midpoint, depth_weighted_bid, depth_weighted_ask, depth_weighted_midprice, …

{
  "model": "same-side-depth-weighted-midpoint",
  "level_count": 3,
  "bid_level_count": 3,
  "ask_level_count": 3,
  "top_midpoint": 100,
  "depth_weighted_bid": 99.97666666666667,
  "depth_weighted_ask": 100.02566666666667,
  "depth_weighted_midprice": 100.00116666666668,
  "shift": 0.0011666666666769743,
  "shift_bps": 0.11666666666769743,
  "bid_total_depth": 3000,
  "ask_total_depth": 3000,
  "state": "above-top-mid"
}

Other exports#

This module also exports orderBookSlope, microprice, orderBookResiliency, hawkesOrderArrival, 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#

Calculation flow#

flowchart LR
    A["Question: Where is the center of the selected book after each side is summarized with its own displayed depth?"] --> B["Reconstruct one causal book or event state"]
    B --> C["Freeze scope, window, sequence, session, units, and variant"]
    C --> D{"Eligible input?"}
    D -- "No" --> E["Reject with topic-specific reason"]
    D -- "Yes" --> F["Apply the frozen Depth-Weighted Midprice relationship"]
    F --> G["Expose intermediate diagnostics and state"]
    G --> H{"Static identity, fitted proxy, or conditional model?"}
    H --> I["Report output with convention and evidence boundary"]

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#

• Stoikov microprice paper and explicit package convention — Sasha Stoikov; exact same-side weighting is a repository implementation choice
• NYSE Integrated Feed — NYSE
• Publication and data boundary

The rest of the Order-Book Dynamics family#

• Order-Book SlopeHow steeply depth accumulates as you move away from the touch.
• MicropriceThe midpoint weighted by the *opposite* side's size, so a heavy bid pulls the price up.
• Order-Book ResiliencyHow quickly the book refills after being depleted, fitted as a decay over observed displacement.
• Hawkes Order-Arrival ModelA self-exciting point process: each arrival raises the probability of the next.