This paper investigates the intricate relationship between the dynamics of bid and ask queues in a limit order book and the intensity of trade arrivals. The research focuses specifically on how quote imbalance at the top of the book influences both the probability of price movements and the arrival of trades. By examining these connections, the study provides insights into market microstructure behavior and the mechanisms through which order flow affects price formation.

The authors develop a novel stochastic model designed to capture the joint dynamics of the top-of-book queues and the trading process. They implement a semi-analytic approach to calculate the relative probabilities of various market events, allowing for efficient computation of event likelihoods based on current market conditions. The model is then calibrated using historical market data, with the researchers evaluating both the quality of fit and the practical applications of their results for market participants and quantitative analysts.