Trading and Market Microstructure
In this paper, we propose a new model to address the problem of negative interest rates that preserves the analytical tractability of the original Cox-Ingersoll-Ross (CIR) model without introducing a shift to the market interest rates,…
The Maker Protocol is a decentralized finance application that enables collateralized lending. The application uses open-bid, second-price auctions to complete its loan liquidation process. In this paper, we develop a bidding function for…
We provide an economically sound micro-foundation to linear price impact models, by deriving them as the equilibrium of a suitable agent-based system. Our setup generalizes the well-known Kyle model, by dropping the assumption of a terminal…
It is a difficult task for both professional investors and individual traders continuously making profit in stock market. With the development of computer science and deep reinforcement learning, Buy\&Hold (B\&H) has been oversteped by many…
We propose an analytically tractable class of models for the dynamics of a limit order book, described through a stochastic partial differential equation (SPDE) with multiplicative noise for the order book centered at the mid-price, along…
Automated market makers (AMM) have grown to obtain significant market share within the cryptocurrency ecosystem, resulting in a proliferation of new products pursuing exotic strategies for horizontal differentiation. Yet, their theoretical…
We propose a microscopic model to describe the dynamics of the fundamental events in the limit order book (LOB): order arrivals and cancellations. It is based on an operator algebra for individual orders and describes their effect on the…
Bitcoin, one of the major cryptocurrencies, presents great opportunities and challenges with its tremendous potential returns accompanying high risks. The high volatility of Bitcoin and the complex factors affecting them make the study of…
I present an overview of some recent advancements on the empirical analysis and theoretical modeling of the process of price formation in financial markets as the result of the arrival of orders in a limit order book exchange. After…
The first half of the paper is devoted to description and implementation of statistical tests arguing for the presence of a Brownian component in the inventories and wealth processes of individual traders. We use intra-day data from the…
We develop a fundamentally different stochastic dynamic programming model of trading costs. Built on a strong theoretical foundation, our model provides insights to market participants by splitting the overall move of the security price…
We analyze an optimal trade execution problem in a financial market with stochastic liquidity. To this end we set up a limit order book model in which both order book depth and resilience evolve randomly in time. Trading is allowed in both…
This study first reconstructs three deep learning powered stock trading models and their associated strategies that are representative of distinct approaches to the problem and established upon different aspects of the many theories evolved…
First, a big data analysis of the transactions and smart contracts made on the Ethereum blockchain is performed, revealing interesting trends in motion. Next, these trends are compared with the public's interest in Ether and Bitcoin,…
Advances in Reinforcement Learning (RL) span a wide variety of applications which motivate development in this area. While application tasks serve as suitable benchmarks for real world problems, RL is seldomly used in practical scenarios…
This paper presents an optimal strategy for portfolio liquidation under discrete time conditions. We assume that N risky assets held will be liquidated according to the same time interval and order quantity, and the basic price processes of…
This article comes up with an intraday trading strategy under T+1 using Markowitz optimization and Multilayer Perceptron (MLP) with published stock data obtained from the Shenzhen Stock Exchange and Shanghai Stock Exchange. The empirical…
As a fundamental problem in algorithmic trading, order execution aims at fulfilling a specific trading order, either liquidation or acquirement, for a given instrument. Towards effective execution strategy, recent years have witnessed the…
We consider a 2-dimensional marked Hawkes process with increasing baseline intensity in order to model prices on electricity intraday markets. This model allows to represent different empirical facts such as increasing market activity,…
In science and especially in economics, agent-based modeling has become a widely used modeling approach. These models are often formulated as a large system of difference equations. In this study, we discuss two aspects, numerical modeling…