Trading and Market Microstructure
Pari-mutuel markets are trading platforms through which the common market maker simultaneously clears multiple contingent claims markets. This market has several distinctive properties that began attracting the attention of the financial…
Studying Binomial and Gaussian return dynamics in discrete time, we show how excess volatility can be traded to create growth. We test our results on real world data to confirm the observed model phenomena while also highlighting implicit…
This paper is a continuation of Ishitani and Kato (2015), in which we derived a continuous-time value function corresponding to an optimal execution problem with uncertain market impact as the limit of a discrete-time value function. Here,…
In this paper, we propose a minimal model beyond geometric Brownian motion that aims to describe price actions with market inefficiency. From simple financial theory considerations, we arrive at a simple two-variable hidden Markovian time…
Market manipulation is a strategy used by traders to alter the price of financial securities. One type of manipulation is based on the process of buying or selling assets by using several trading strategies, among them spoofing is a popular…
In this paper, we consider the optimal portfolio liquidation problem under the dynamic mean-variance criterion and derive time-consistent solutions in three important models. We give adapted optimal strategies under a reconsidered…
We study the long memory of order flow for each of three liquid currency pairs on a large electronic trading platform in the foreign exchange (FX) spot market. Due to the extremely high levels of market activity on the platform, and in…
In this article, the long-term behavior of the stock market index of the New York Stock Exchange is studied, for the period 1950 to 2013. Specifically, the CRSP Value-Weighted and CRSP Equal-Weighted index are analyzed in terms of market…
Order positions are key variables in algorithmic trading. This paper studies the limiting behavior of order positions and related queues in a limit order book. In addition to the fluid and diffusion limits for the processes, fluctuations of…
We study the problem of optimal execution of a trading order under Volume Weighted Average Price (VWAP) benchmark, from the point of view of a risk-averse broker. The problem consists in minimizing mean-variance of the slippage, with…
In recent years several trading platforms appeared which provide a backtest engine to calculate historic performance of self designed trading strategies on underlying candle data. The construction of a correct working backtest engine is,…
We introduce and establish the main properties of QHawkes ("Quadratic" Hawkes) models. QHawkes models generalize the Hawkes price models introduced in E. Bacry et al. (2014), by allowing all feedback effects in the jump intensity that are…
We present a thorough empirical analysis of market impact on the Bitcoin/USD exchange market using a complete dataset that allows us to reconstruct more than one million metaorders. We empirically confirm the "square-root law'' for market…
This paper reexamines the profitability of loser, winner and contrarian portfolios in the Chinese stock market using monthly data of all stocks traded on the Shanghai Stock Exchange and Shenzhen Stock Exchange covering the period from…
We consider a model for linear transient price impact for multiple assets that takes cross-asset impact into account. Our main goal is to single out properties that need to be imposed on the decay kernel so that the model admits…
We develop from basic economic principles a continuous-time model for a large investor who trades with a finite number of market makers at their utility indifference prices. In this model, the market makers compete with their quotes for the…
This paper investigates the equilibrium interactions between trading targets and private information in a multi-period Kyle (1985) market. There are two investors who each follow dynamic trading strategies: A strategic portfolio rebalancer…
Technical trading rules have a long history of being used by practitioners in financial markets. Their profitable ability and efficiency of technical trading rules are yet controversial. In this paper, we test the performance of more than…
Although technical trading rules have been widely used by practitioners in financial markets, their profitability still remains controversial. We here investigate the profitability of moving average (MA) and trading range break (TRB) rules…
We generalise the description of the dynamics of the order book of financial markets in terms of a Brownian particle embedded in a fluid of incoming, exiting and annihilating particles by presenting a model of the velocity on each side (buy…