  This paper proposes a parametric approach for stochastic modeling of limit
order markets. The models are obtained by augmenting classical perfectly liquid
market models by few additional risk factors that describe liquidity properties
of the order book. The resulting models are easy to calibrate and to analyze
using standard techniques for multivariate stochastic processes. Despite their
simplicity, the models are able to capture several properties that have been
found in microstructural analysis of limit order markets. Calibration of a
continuous-time three-factor model to Copenhagen Stock Exchange data exhibits
e.g.\ mean reversion in liquidity as well as the so called crowding out effect
which influences subsequent mid-price moves. Our dynamic models are well suited
also for analyzing market resiliency after liquidity shocks.
