Early Detection of Latent Microstructure Regimes in Limit Order Books

ArXi:2604.20949v1 Announce Type: new Limit order books can transition rapidly from stable to stressed conditions, yet standard early-warning signals such as order flow imbalance and short-term volatility are inherently reactive. We formalise this limitation via a three-regime causal data-generating process (stable $\to$ latent build-up $\to$ stress) in which a latent deterioration phase creates a prediction window prior to observable stress.