Related papers: How does the market react to your order flow?
Behavioral finance has become an increasingly important subfield of finance. However the main parts of behavioral finance, prospect theory included, understand financial markets through individual investment behavior. Behavioral finance…
Price-mediated contagion occurs when a positive feedback loop develops following a drop in asset prices which forces banks and other financial institutions to sell their holdings. Prior studies of such events fix the level of market…
Opinions and beliefs determine the evolution of social systems. This is of particular interest in finance, as the increasing complexity of financial systems is coupled with information overload. Opinion formation, therefore, is not always…
We identify and analyze statistical regularities and irregularities in the recent order flow of different NASDAQ stocks, focusing on the positions where orders are placed in the orderbook. This includes limit orders being placed outside of…
Financial markets provide an ideal frame for studying decision making in crowded environments. Both the amount and accuracy of the data allows to apply tools and concepts coming from physics that studies collective and emergent phenomena or…
Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at the aggregate level. Coordination…
This paper reviews some of the phenomenological models which have been introduced to incorporate the scaling properties of financial data. It also illustrates a microscopic model, based on heterogeneous interacting agents, which provides a…
This study investigates the functioning of modern payment systems through the lens of banks' maturity mismatch practices, and it examines the effects of banks' refusal to roll over short-term interbank liabilities on financial stability.…
We introduce a simple framework in which market participants update their prior about an efficient price with a model-based learning process. We show that exponential intensities for the arrival of aggressive orders arise naturally in this…
Market information events are generated intermittently and disseminated at high speeds in real-time. Market participants consume this high-frequency data to build limit order books, representing the current bids and offers for a given…
Interaction strategies for reward in competitive environments are significantly influenced by the nature and extent of available information. In financial markets, particularly foreign exchange (forex), traders operate independently with…
A microeconomic approach is proposed to derive the fluctuations of risky asset price, where the market participants are modeled as prospect trading agents. As asset price is generated by the temporary equilibrium between demand and supply,…
In this paper, we examine in an abstract framework, how a tradeoff between efficiency and robustness arises in different dynamic oligopolistic market architectures. We consider a market in which there is a monopolistic resource provider and…
Supply networks require collaboration in a competitive environment. To achieve this, nodes in the network often form symbiotic relationships as they can be adversely effected by the closure of companies in the network, especially where…
The distribution of returns in financial time series exhibits heavy tails. In empirical studies, it has been found that gaps between the orders in the order book lead to large price shifts and thereby to these heavy tails. We set up an…
The common wisdom argues that, in general, large trades cause large price changes, while small trades cause small price changes. However, for extremely large price changes, the trade size and news play a minor role, while the liquidity…
We show that the statistics of spreads in real order books is characterized by an intrinsic asymmetry due to discreteness effects for even or odd values of the spread. An analysis of data from the NYSE order book points out that traders'…
Commonly used limit order book attributes are empirically considered based on NASDAQ ITCH data. It is shown that some of them have the properties drastically different from the ones assumed in many market dynamics study. Because of this…
We study the cause of large fluctuations in prices in the London Stock Exchange. This is done at the microscopic level of individual events, where an event is the placement or cancellation of an order to buy or sell. We show that price…
We extend a linear version of the liquidity risk model of Cetin et al. (2004) to allow for price impacts. We show that the impact of a market order on prices depends on the size of the transaction and the level of liquidity. We obtain a…