# TRADES: Generating Realistic Market Simulations with Diffusion Models

arXiv: https://arxiv.org/abs/2502.07071 · HTML: https://mlsanity.com/paper/2502.07071/

## Key facts

- Cited by 5 papers in the map (data through 14 Oct 2026).
- Placed in Flow matching, time series and science, one of 14 directions in Diffusion models.
- Builds on 28 of its 77 references that are in the map.
- First posted on arXiv 31 Jan 2025.

## Placed in

- Diffusion models / [Flow matching, time series and science](https://mlsanity.com/diffusion/flow-matching-time-series-and-science/)

## Builds on (most cited first, 28 of 28)

- [Attention Is All You Need](https://mlsanity.com/paper/1706.03762/) (2017)
- [Denoising Diffusion Probabilistic Models](https://mlsanity.com/paper/2006.11239/) (2020)
- [Denoising Diffusion Implicit Models](https://mlsanity.com/paper/2010.02502/) (2020)
- [Deep Unsupervised Learning using Nonequilibrium Thermodynamics](https://mlsanity.com/paper/1503.03585/) (2015)
- [Improved Denoising Diffusion Probabilistic Models](https://mlsanity.com/paper/2102.09672/) (2021)
- [Structured Denoising Diffusion Models in Discrete State-Spaces](https://mlsanity.com/paper/2107.03006/) (2021)
- [Simplified State Space Layers for Sequence Modeling](https://mlsanity.com/paper/2208.04933/) (2022)
- [CSDI: Conditional Score-based Diffusion Models for Probabilistic Time Series Imputation](https://mlsanity.com/paper/2107.03502/) (2021)
- [Tackling the Generative Learning Trilemma with Denoising Diffusion GANs](https://mlsanity.com/paper/2112.07804/) (2021)
- [Reliable Fidelity and Diversity Metrics for Generative Models](https://mlsanity.com/paper/2002.09797/) (2020)
- [Diffusion-TS: Interpretable Diffusion for General Time Series Generation](https://mlsanity.com/paper/2403.01742/) (2024)
- [Generative Time Series Forecasting with Diffusion, Denoise, and Disentanglement](https://mlsanity.com/paper/2301.03028/) (2023)
- [VIDM: Video Implicit Diffusion Models](https://mlsanity.com/paper/2212.00235/) (2022)
- [Deep Reinforcement Learning for Trading](https://mlsanity.com/paper/1911.10107/) (2019)
- [Conditional Text Image Generation with Diffusion Models](https://mlsanity.com/paper/2306.10804/) (2023)
- [Benchmark Dataset for Mid-Price Forecasting of Limit Order Book Data with Machine Learning Methods](https://mlsanity.com/paper/1705.03233/) (2017)
- [Get Real: Realism Metrics for Robust Limit Order Book Market Simulations](https://mlsanity.com/paper/1912.04941/) (2019)
- [Modeling Temporal Data as Continuous Functions with Stochastic Process Diffusion](https://mlsanity.com/paper/2211.02590/) (2022)
- [Generating Realistic Stock Market Order Streams](https://mlsanity.com/paper/2006.04212/) (2020)
- [Towards Realistic Market Simulations: a Generative Adversarial Networks Approach](https://mlsanity.com/paper/2110.13287/) (2021)
- [Learning to simulate realistic limit order book markets from data as a World Agent](https://mlsanity.com/paper/2210.09897/) (2022)
- [Regular Time-series Generation using SGM](https://mlsanity.com/paper/2301.08518/) (2023)
- [Generative AI for End-to-End Limit Order Book Modelling: A Token-Level Autoregressive Generative Model of Message Flow Using a Deep State Space Network](https://mlsanity.com/paper/2309.00638/) (2023)
- [Conditional Generators for Limit Order Book Environments: Explainability, Challenges, and Robustness](https://mlsanity.com/paper/2306.12806/) (2023)
- [Market-GAN: Adding Control to Financial Market Data Generation with Semantic Context](https://mlsanity.com/paper/2309.07708/) (2023)
- [Neural Stochastic Agent-Based Limit Order Book Simulation: A Hybrid Methodology](https://mlsanity.com/paper/2303.00080/) (2023)
- [LOB-Based Deep Learning Models for Stock Price Trend Prediction: A Benchmark Study](https://mlsanity.com/paper/2308.01915/) (2023)
- [How informative is the Order Book Beyond the Best Levels? Machine Learning Perspective](https://mlsanity.com/paper/2203.07922/) (2022)

## Built on by (most cited first, 5 of 5)

- [TLOB: A Novel Transformer Model with Dual Attention for Price Trend Prediction with Limit Order Book Data](https://mlsanity.com/paper/2502.15757/) (2025)
- [LOBERT: Generative AI Foundation Model for Limit Order Book Messages](https://mlsanity.com/paper/2511.12563/) (2025)
- [DiffLOB: Diffusion Models for Counterfactual Generation in Limit Order Books](https://mlsanity.com/paper/2602.03776/) (2026)
- [Robust Reinforcement Learning in Finance: Modeling Market Impact with Elliptic Uncertainty Sets](https://mlsanity.com/paper/2510.19950/) (2025)
- [CSTrader: A Testbed for Language-Grounded Trading in a Community-Driven Virtual Asset Market](https://mlsanity.com/paper/2606.31461/) (2026)

## Abstract (arXiv)

Financial markets are complex systems characterized by high statistical noise, nonlinearity, volatility, and constant evolution. Thus, modeling them is extremely hard. Here, we address the task of generating realistic and responsive Limit Order Book (LOB) market simulations, which are fundamental for calibrating and testing trading strategies, performing market impact experiments, and generating synthetic market data. We propose a novel TRAnsformer-based Denoising Diffusion Probabilistic Engine for LOB Simulations (TRADES). TRADES generates realistic order flows as time series conditioned on the state of the market, leveraging a transformer-based architecture that captures the temporal and spatial characteristics of high-frequency market data. There is a notable absence of quantitative metrics for evaluating generative market simulation models in the literature. To tackle this problem, we adapt the predictive score, a metric measured as an MAE, to market data by training a stock price predictive model on synthetic data and testing it on real data. We compare TRADES with previous works on two stocks, reporting a 3.27 and 3.48 improvement over SoTA according to the predictive score, demonstrating that we generate useful synthetic market data for financial downstream tasks. Furthermore, we assess TRADES's market simulation realism and responsiveness, showing that it effectively learns the conditional data distribution and successfully reacts to an experimental agent, giving sprout to possible calibrations and evaluations of trading strategies and market impact experiments. To perform the experiments, we developed DeepMarket, the first open-source Python framework for LOB market simulation with deep learning. In our repository, we include a synthetic LOB dataset composed of TRADES's generated simulations.