Related papers: Optimal intervention in the foreign exchange marke…
We analyze the efficiency of markets with friction, particularly power markets. We model the market as a dynamic system with $(d_t;\,t\geq 0)$ the demand process and $(s_t;\,t\geq 0)$ the supply process. Using stochastic differential…
In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…
We consider a stochastic impulse control problem that is motivated by applications such as the optimal exploitation of a natural resource. In particular, we consider a stochastic system whose uncontrolled state dynamics are modelled by a…
We study a single risky financial asset model subject to price impact and transaction cost over an infinite horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in fixed…
We present an analysis of the price impact associated with trades effected by different financial firms. Using data from the Spanish Stock Market, we find a high degree of heterogeneity across different market members, both in the…
We consider the problem of optimal trading for a power producer in the context of intraday electricity markets. The aim is to minimize the imbalance cost induced by the random residual demand in electricity, i.e. the consumption from the…
We study a linear price impact model including other liquidity takers, whose flow of orders either follows a Poisson or a Hawkes process. The optimal execution problem is solved explicitly in this context, and the closed-formula optimal…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
The foreign exchange market has taken an important role in the global financial market. While foreign exchange trading brings high-yield opportunities to investors, it also brings certain risks. Since the establishment of the foreign…
In a financial exchange, market impact is a measure of the price change of an asset following a transaction. This is an important element of market microstructure, which determines the behaviour of the market following a trade. In this…
This article explores the optimisation of trading strategies in Constant Function Market Makers (CFMMs) and centralised exchanges. We develop a model that accounts for the interaction between these two markets, estimating the conditional…
We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…
This article considers the minimization of the total number of infected individuals over the course of an epidemic in which the rate of infectious contacts can be reduced by time-dependent nonpharmaceutical interventions. The societal and…
We consider an optimal trading problem under a market impact model with endogenous market resistance generated by a sophisticated trader who (partially) detects metaorders and trades against them to exploit price overreactions induced by…
Foreign exchange rates movements exhibit significant cross-correlations even on very short time-scales. The effect of these statistical relationships become evident during extreme market events, such as flash crashes.In this scenario, an…
We propose a price impact model where changes in prices are purely driven by the order flow in the market. The stochastic price impact of market orders and the arrival rates of limit and market orders are functions of the market liquidity…
This paper studies a delegation problem faced by the planner who wants to regulate receivers' reaction choices in markets for matching between receivers and senders with signaling. We provide a noble insight into the planner's willingness…
This study presents a novel approach to modelling economic agents as analogous to spin states in physics, particularly the Ising model. By associating economic activity with spin orientations (up for inactivity, down for activity), the…
We introduce an autoregressive-type model with self-modulation effects for a foreign exchange rate by separating the foreign exchange rate into a moving average rate and an uncorrelated noise. From this model we indicate that traders are…
We explore the competitive effects of reaction time of automated trading strategies in simulated financial markets containing a single exchange with public limit order book and continuous double auction matching. A large body of research…