Related papers: Feedback and efficiency in limit order markets
Market making refers to a form of trading in financial markets characterized by passive orders which add liquidity to limit order books. Market makers are important for the proper functioning of financial markets worldwide. Given the…
Minimizing execution costs for large orders is a fundamental challenge in finance. Firms often depend on brokers to manage their trades due to limited internal resources for optimizing trading strategies. This paper presents a methodology…
One of the most popular methods of controlling dynamical systems is feedback. It can be used without acquiring detailed knowledge of the underlying system. In this work, we study the stability of fractional-order linear difference equations…
A novel high-frequency market-making approach in discrete time is proposed that admits closed-form solutions. By taking advantage of demand functions that are linear in the quoted bid and ask spreads with random coefficients, we model the…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
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 microstructural model for the order flow in financial markets that distinguishes between {\it core orders} and {\it reaction flow}, both modeled as Hawkes processes. This model has a natural scaling limit that reconciles a…
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…
A point process for event arrivals in high frequency trading is presented. The intensity is the product of a Hawkes process and high dimensional functions of covariates derived from the order book. Conditions for stationarity of the process…
Volume imbalance in a limit order book is often considered as a reliable indicator for predicting future price moves. In this work, we seek to analyse the nuances of the relationship between prices and volume imbalance. To this end, we…
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…
In this article, we delve into the applications and extensions of the queue-reactive model for the simulation of limit order books. Our approach emphasizes the importance of order sizes, in conjunction with their type and arrival rate, by…
We study optimal liquidation strategies under partial information for a single asset within a finite time horizon. We propose a model tailored for high-frequency trading, capturing price formation driven solely by order flow through…
In this work, we present a continuous-time large-population game for modeling market microstructure betweentwo consecutive trades. The proposed modeling framework is inspired by our previous work [23]. In this framework, the Limit Order…
Market making is one of the most important aspects of algorithmic trading, and it has been studied quite extensively from a theoretical point of view. The practical implementation of so-called "optimal strategies" however suffers from the…
Probabilistic intraday electricity price forecasting is becoming increasingly important for short-term power-system operation. With increasing renewable generation, demand-side flexibility, and storage assets, market participants need to…
Evolutions of the trading landscape lead to the capability to exchange the same financial instrument on different venues. Because of liquidity issues, the trading firms split large orders across several trading destinations to optimize…
We propose a pseudo-market solution to resource allocation problems subject to constraints. Our treatment of constraints is general: including bihierarchical constraints due to considerations of diversity in school choice, or scheduling in…
We study an optimal execution strategy for purchasing a large block of shares over a fixed time horizon. The execution problem is subject to a general price impact that gradually dissipates due to market resilience. We allow for general…
We investigate activities that have different periods of duration. We define the profit intensity as a measure of this economic category. The profit intensity in a repeated trading has a unique property of attaining its maximum at a fixed…