Macroscopic Market Making Games via Multidimensional Decoupling Field
Abstract
Building on the macroscopic market making framework as a control problem, this paper investigates its extension to stochastic games. In the context of price competition, each agent is benchmarked against the best quote offered by the others. We begin with the linear case. While constructing the solution directly, the \textit{ordering property} and the dimension reduction in the equilibrium are revealed. For the non-linear case, we extend the decoupling approach by introducing a multidimensional \textit{characteristic equation} to analyse the well-posedness of the forward-backward stochastic differential equations. Properties of the coefficients in this characteristic equation are derived using tools from non-smooth analysis. Several new well-posedness results are presented.
Keywords
Cite
@article{arxiv.2406.05662,
title = {Macroscopic Market Making Games via Multidimensional Decoupling Field},
author = {Ivan Guo and Shijia Jin},
journal= {arXiv preprint arXiv:2406.05662},
year = {2025}
}
Comments
This arXiv version of a paper emphasises the mathematical aspects