Order Book Imbalance Alpha - Quant Researcher Interview Question
Difficulty: Medium
Category: market_microstructure
Asked at: Jump Trading, Virtu, WorldQuant, Tower Research, Citadel Securities, HRT
Topics: market_microstructure, alpha_generation, statistics, pandas
Problem Description
Order Book Imbalance (OBI) quantifies the disparity between buy and sell interest at the best price levels, serving as a fundamental signal in market microstructure analysis. By measuring this pressure, quantitative researchers can estimate short-term price directionality and liquidity dynamics essential for high-frequency trading strategies.
Task
Implement a function to calculate the Order Book Imbalance signal and its correlation with future price returns. Given time-series data for best bid
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