Related papers: Regulation, Volatility and Efficiency in Continuou…
We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…
We formulate an equilibrium model of intraday trading in electricity markets. Agents face balancing constraints between their customers consumption plus intraday sales and their production plus intraday purchases. They have continuously…
In this paper, I introduce a profit-maximizing centralized marketplace into a decentralized market with search frictions. Agents choose between the centralized marketplace and the decentralized bilateral trade. I characterize the optimal…
This paper studies the topic of cost-efficiency in incomplete markets. A payoff is called cost-efficient if it achieves a given probability distribution at some given investment horizon with a minimum initial budget. Extensive literature…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
In this work we investigate the inefficiency of the electricity system with strategic agents. Specifically, we prove that without a proper control the total demand of an inefficient system is at most twice the total demand of the optimal…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
We discuss an incentivizing market and model-based approach to design the energy management and control systems which realize high-quality ancillary services in dynamic power grids. Under the electricity liberalization, such incentivizing…
Electricity storage is used for intertemporal price arbitrage and for ancillary services that balance unforeseen supply and demand fluctuations via frequency regulation. We present an optimization model that computes bids for both arbitrage…
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…
We examine two-sided markets where players arrive stochastically over time and are drawn from a continuum of types. The cost of matching a client and provider varies, so a social planner is faced with two contending objectives: a) to reduce…
We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the…
The main focus of this work is to understand the dynamics of non regulated markets. The present model can describe the dynamics of any market where the pricing is based on supply and demand. It will be applied here, as an example, for the…
Considering that the existing setup of the European electricity markets promotes the spatial coordination of neighbouring power systems only on the day-ahead market stage, regional system operators have to rely mainly on their internal…
Pricing decisions are often made when market information is still poor. In turn, existing theoretical models often reason about the response of optimal prices to changing market characteristics without exploiting all available information…
Statistical mechanics provides a useful analog for understanding the behavior of complex adaptive systems, including electric power markets and the power systems they intend to govern. Market-based control is founded on the conjecture that…
Demand-side management provides a great potential for improving the efficiency and reliability of energy systems. This requires a mechanism to connect the market level and the demand side. The flexibility function is a novel approach that…
The modelling of modern power markets requires the representation of the following main features: (i) a stochastic dynamic decision process, with uncertainties related to renewable production and fuel costs, among others; and (ii) a…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
One of the recognized principal issues brought along by the steadfast migration towards power electronic interfaced energy sources is the loss of rotational inertia. In conventional power systems, the inertia of the synchronous machines…