Trading and Market Microstructure
Exchanges implement intentional trade delays to limit the harmful impact of low-latency trading. Do such "speed bumps" curb investment in fast trading technology? Data is scarce since trading technologies are proprietary. We build an…
Latent order book models have allowed for significant progress in our understanding of price formation in financial markets. In particular they are able to reproduce a number of stylized facts, such as the square-root impact law. An…
We propose a method for detection and prediction of native and synthetic iceberg orders on Chicago Mercantile Exchange. Native (managed by the exchange) icebergs are detected using discrepancies between the resting volume of an order and…
We consider the problem of designing a derivatives exchange aiming at addressing clients needs in terms of listed options and providing suitable liquidity. We proceed into two steps. First we use a quantization method to select the options…
We utilize a fundamentally different model of trading costs to look at the effect of the opening of the Hong Kong Shanghai Connect that links the stock exchanges in the two cities, arguably the biggest event in international business and…
The autonomous trading agent is one of the most actively studied areas of artificial intelligence to solve the capital market portfolio management problem. The two primary goals of the portfolio management problem are maximizing profit and…
With the increasing power of computers and the rapid development of self-learning methodologies such as machine learning and artificial intelligence, the problem of constructing an automatic Financial Trading Systems (FTFs) becomes an…
The continuous-time version of Kyle's (1985) model is studied, in which market makers are not fiduciaries. They have some market power which they utilize to set the price to their advantage, resulting in positive expected profits. This has…
In finance, the weak form of the Efficient Market Hypothesis asserts that historic stock price and volume data cannot inform predictions of future prices. In this paper we show that, to the contrary, future intra-day stock prices could be…
It has been suggested that marked point processes might be good candidates for the modelling of financial high-frequency data. A special class of point processes, Hawkes processes, has been the subject of various investigations in the…
Despite the fact that an intraday market price distribution is not normal, the random walk model of price behaviour is as important for the understanding of basic principles of the market as the pendulum model is a starting point of many…
Working on different aspects of algorithmic trading we empirically discovered a new market invariant. It links together the volatility of the instrument with its traded volume, the average spread and the volume in the order book. The…
Latency (i.e., time delay) in electronic markets affects the efficacy of liquidity taking strategies. During the time liquidity takers process information and send marketable limit orders (MLOs) to the exchange, the limit order book (LOB)…
Recent years have witnessed the successful marriage of finance innovations and AI techniques in various finance applications including quantitative trading (QT). Despite great research efforts devoted to leveraging deep learning (DL)…
In this paper, we propose stock trading based on the average tax basis. Recall that when selling stocks, capital gain should be taxed while capital loss can earn certain tax rebate. We learn the optimal trading strategies with and without…
We introduce and study the notion of sure profit via flash strategy, consisting of a high-frequency limit of buy-and-hold trading strategies. In a fully general setting, without imposing any semimartingale restriction, we prove that there…
Exchanges acquire excess processing capacity to accommodate trading activity surges associated with zero-sum high-frequency trader (HFT) "duels." The idle capacity's opportunity cost is an externality of low-latency trading. We build a…
We observe the effects of the three different events that cause spread changes in the order book, namely trades, deletions and placement of limit orders. By looking at the frequencies of the relative amounts of price changing events, we…
We compare optimal static and dynamic solutions in trade execution. An optimal trade execution problem is considered where a trader is looking at a short-term price predictive signal while trading. When the trader creates an instantaneous…
In this study, we applied a stochastic spread pairs trading strategy on the Indian commodity market. The complete set of commodities were taken whose spot price was available for the period of January 1st 2010 to December 31st 2018…