{
  "abstract": "We give a unified analytic account of correlation emergence and the Epps effect in two coupled limit order books. The Epps effect is the empirical reduction in measured cross-asset log-return correlation at short aggregation scales, or equivalently the recovery of measured correlation as the aggregation interval increases. The model starts from a fixed-grid discrete random walk for order flow in operational time, with creation, cancellation and diffusion. A pair-trader coupling between the books is introduced at the level of order creation, and calendar time is imposed through separate observation clocks. We clarify how the operational-time model reduces to coupled reaction--diffusion equations with a moving reaction boundary defining the model log-mid-price. Using a regularised local-response representation of the coupling, we derive approximate closed-form expressions for realised correlations as a function of aggregation time. Here the Epps effect is shown to arise from two distinct mechanisms: asynchronous observation clocks (subordination), finite coupling response times, and their combination.",
  "abstract_shown": true,
  "affiliations": [],
  "article_type": "Journal reference: Physica A: Statistical Mechanics and its Applications, 2026, 132172",
  "arxiv": "2606.14182",
  "author_total": 2,
  "authors": [
    {
      "name": "Chris Angstmann"
    },
    {
      "name": "Tim Gebbie"
    }
  ],
  "bibtex": "https://research.draconitic.com/paper/axqv6yd5jn1c8.bib",
  "cited_by": 0,
  "doi": "10.48550/arxiv.2606.14182",
  "fulltext_url": null,
  "id": "axqv6yd5jn1c8",
  "issns": [],
  "landing_url": "https://arxiv.org/abs/2606.14182",
  "language": null,
  "licence": "CC-BY-NC-SA-4.0",
  "licence_label": "CC BY-NC-SA 4.0",
  "licence_source": "article",
  "licence_url": "http://creativecommons.org/licenses/by-nc-sa/4.0/",
  "metadata_licence": "CC0-1.0",
  "native_subjects": [
    [
      "arxiv",
      "math.AP"
    ],
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      "arxiv",
      "q-fin.ST"
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      "arxiv",
      "q-fin.TR"
    ]
  ],
  "openalex": null,
  "pdf_url": "https://arxiv.org/pdf/2606.14182",
  "pmcid": null,
  "pmid": null,
  "published": "2026-09-05",
  "publisher": null,
  "ris": "https://research.draconitic.com/paper/axqv6yd5jn1c8.ris",
  "sources": [
    {
      "first_seen": "2026-10-30T12:36:32Z",
      "native_id": "2606.14182",
      "source": "arxiv",
      "url": "https://arxiv.org/abs/2606.14182"
    }
  ],
  "subjects": [
    {
      "field": "mathematics",
      "origin": "arxiv:math.AP",
      "subfield": "analysis-pdes"
    }
  ],
  "title": "Correlation emergence and the Epps effect in two coupled limit order books",
  "title_text": "Correlation emergence and the Epps effect in two coupled limit order books",
  "type": "preprint",
  "updated_at": "2026-11-01T12:20:50Z",
  "url": "https://research.draconitic.com/paper/axqv6yd5jn1c8",
  "venue": "arXiv",
  "versions": [
    {
      "doi": "10.1016/j.physa.2026.132172",
      "pid": null,
      "relation": "published-as",
      "title": null,
      "venue": null
    }
  ]
}