Order Flow Imbalance

Install and import

bash

npm install fintech-algorithms

import { orderFlowImbalance } from "fintech-algorithms/market-microstructure/order-flow-and-impact/order-flow-imbalance";

Signature

orderFlowImbalance(inputRows, resetOnSession, normalizeByDepth)

Net signed change in depth at the touch — the quantity that best explains short-horizon price moves in the microstructure literature. It counts additions and cancellations, not just trades.

Parameters

Name	Type	Notes
`inputRows`	`Row[]`	Sequential top-of-book observations with prices and sizes on both sides.
`resetOnSession`	`boolean`	Whether the cumulative measure restarts each session. Carrying it overnight mixes regimes.
`normalizeByDepth`	`boolean`	Divide by prevailing depth, which makes the measure comparable across instruments of different thickness.

Returns

{ ofi, cumulative, rows, … }

Per-observation imbalance and its cumulative path.

Errors

When rows are not in sequence order — throws

Complexity: time O(n), space O(n).

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

inputRows

[
  {
    "id": "E001",
    "session": "S1",
    "event_time_ns": 0,
    "bid_price": 100,
    "bid_size": 500,
    "ask_price": 100.02,
    "ask_size": 520
  },
  {
    "id": "E002",
    "session": "S1",
    "event_time_ns": 1000000,
    "bid_price": 100,
    "bid_size": 573,
    "ask_price": 100.02,
    "ask_size": 567
  },
  {
    "id": "E003",
    "session": "S1",
    "event_time_ns": 2000000,
    "bid_price": 100,
    "bid_size": 996,
    "ask_price": 100.02,
    "ask_size": 614
  }
]

Showing 3 of 60 elements.

resetOnSession

true

normalizeByDepth

false

Call

orderFlowImbalance(inputRows, resetOnSession, normalizeByDepth)

Returns

object with 12 fields: model, state, reset_on_session, normalize_by_depth, event_count, classified_event_count, positive_event_count, negative_event_count, …

{
  "model": "cont-best-quote-ofi",
  "state": "estimated",
  "reset_on_session": true,
  "normalize_by_depth": false,
  "event_count": 60,
  "classified_event_count": 59,
  "positive_event_count": 34,
  "negative_event_count": 25,
  "zero_event_count": 0,
  "cumulative_ofi": 58,
  "mean_absolute_event_ofi": 440.5762711864,
  "trace": [
    {
      "id": "E001",
      "index": 0,
      "session": "S1",
      "bid_price": 100,
      "bid_size": 500,
      "ask_price": 100.02,
      "ask_size": 520,
      "event_ofi": 0,
      "cumulative_ofi": 0,
      "side": "balanced",
      "reason": "seed"
    },
    {
      "id": "E002",
      "index": 1,
      "session": "S1",
      "bid_price": 100,
      "bid_size": 573,
      "ask_price": 100.02,
      "ask_size": 567,
      "event_ofi": 26,
      "cumulative_ofi": 26,
      "side": "buy-pressure",
      "reason": "best-quote-event"
    },
    {
      "id": "E003",
      "index": 2,
      "session": "S1",
      "bid_price": 100,
      "bid_size": 996,
      "ask_price": 100.02,
      "ask_size": 614,
      "event_ofi": 376,
      "cumulative_ofi": 402,
      "side": "buy-pressure",
      "reason": "best-quote-event"
    }
  ]
}

Other exports

This module also exports queueImbalance, kyleLambda, hasbrouckPriceImpact, pin, vpin, runTopic. 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.