DiffVolume: Diffusion Models for Volume Generation in Limit Order Books

Modeling limit order books (LOBs) dynamics is a fundamental problem in market microstructure research. In particular, generating high-dimensional volume snapshots with strong temporal and liquidity-dependent patterns remains a challenging task, despite recent work exploring the application of Generative Adversarial Networks to LOBs. In this work, we propose a conditional Diffusion model for the generation of future LOB Volume snapshots (DiffVolume). We evaluate our model across three axes: (1) Realism, where we show that DiffVolume, conditioned on past volume history and time of day, better reproduces statistical properties such as marginal distribution, spatial correlation, and autocorrelation decay; (2) Counterfactual generation, allowing for controllable generation under hypothetical liquidity scenarios by additionally conditioning on a target future liquidity profile; and (3) Downstream prediction, where we show that the synthetic counterfactual data from our model improves the performance of future liquidity forecasting models. Together, these results suggest that DiffVolume provides a powerful and flexible framework for realistic and controllable LOB volume generation.